What Are The Benefits Of An Annuity?

by Tony Durso

A mature couple considers the benefits of an annuityWhen looking to our retirement future, we find a multiple of investment vehicles to choose from and wonder about the benefits of an annuity. No doubt you have heard of and are using some of these now: 401k, IRA, CD's, savings accounts, mutual funds, stocks, etc.

Of these, the least understood is probably the annuity…

An annuity has distinct similarities to and differences from a 401k, IRA or CD.

An annuity offers greater flexibility for retirement planning: You can choose when to receive interest payments for your money with no need to wait for retirement. You can also determine what funds or what rates to fix the money at.

Here are some of the key benefits of an annuity:

In An Annuity Your Money Is Guaranteed By An Insurance Company

With an annuity, your money is placed with an insurance company. The insurance company guarantees your money and is responsible to see that you get paid according to the contract.

Unlike the 401k, IRA & CD, there is no limit to the amount that you can place into an annuity. The mutual fund and stock market have no guarantees at all.

You Determine The Amount Of Interest To Receive In An Annuity

You can determine the amount of interest to receive for your money. This interest can be at an agreed upon fixed rate of it can be variably set depending on the options you choose (similar to mutual funds).

Unlike with the 401k, IRA, CD, mutual funds and stocks, you have better control on the return that you obtain. You do not have to be a finance investment wizard, which the 401k, mutual funds and stock market directly or indirectly requires. And you do not have to micro-manage your account if you don't want to.

You Determine When To Receive Annuity Payments

You can determine when to receive your payments. You can receive monthly/quarterly/annual payments as soon as one month from your deposit (immediate annuity). Or you can have your money grow until you plan to retire (deferred annuity).

Unlike with the 401k or IRA, you don't have to wait until your retirement to take payments (without penalty).

Mutual funds and stocks have their own rules when funds can be taken. Penalties can apply as well as taxes on any gains made.

A CD has similarities, but an annuity can have a fixed interest for a much longer period of time.

There Are Fewer Financial Restrictions On Annuities

There are also financial restrictions on how much you can put into an IRA and 401k. CDs often have special restrictions, and their offers change from time to time.

An annuity operates exactly according to the agreement set at the beginning and does not change unless specified in the contract.

You Get Updates From Retirement Financial Adviser

Those are the simple points of comparison.

As rules and regulations can change on these financial methods, it is always best to speak to a retirement financial advisor to review the best choices available.

Then you can be completely certain of the options for your retirement financial planning.

©2008 Used by permission
For more detailed information on the benefits of an annuity and other annuity facts, visit www.annuities-financial-planning.com