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Is an Annuity a Good Investment Vehicle?

Not everyone wishes to put their savings at risk. Those concerned about increasing their net worth and saving for their retirement likely want something on the proverbial safe side. Not all of the money gained from the interest on the principle may necessarily be intended for reinvestment. Rather, an wish to live comfortably through receiving dividend payments may be sought.

To put money to work effectively and receive a set amount of money each year, an annuity might be thought to be the best financial vehicles. Not all persons are sold on the merits of an annuity though. They may believe there are other, better ways to put their money to use.

Looking at the pros and cons of an annuity may present the best answer to those wondering whether or not this is a smart financial endeavor to enter into.

An annuity is a financial product procured through an insurance company. An annuity is not a policy. Rather, premium payments are made to an insurance company and the company will accrue easing at a fixed rate of interest on a conservative investment or a variable interest rate based on the activity (growth or loss) of the invested money. Money can then be paid out after the accumulation period. The payment structure is going to vary based on the terms of the agreement. Often, the client receives a set amount of money for a number of years as long as he/she lives.

There are quite a few benefits to an annuity. Certain annuities may be tax-deferred, which is always going to be a positive for those wishing to accumulate more wealth. There can be lesser risk with annuities when the annuity accrues at a fixed rate of interest. Those looking to have money in their retirement years are not going to necessarily want to accept a huge amount of risk. The steady, consistent stream of income via annuity payments can also aid in being able to budget easier.

Annuities are far from perfect though. Other methods exist that can reduce the risk your capital may face. Numerous other investment vehicles could very well return a larger return. Traditional investments come with the ability to buy and sell, which annuities do not.

Annuities can offer a viable way to earn a good return on an investment for retirement provided the right annuity plan is procured. Discussing options with planners at might be helpful when trying to figure out what is the best course of action to take.

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