With rising inflation and unpredictable stock markets, annuities seem like a better choice than ever before. But even though most annuities have the same basic structure, there are a surprising number of varieties.
The best annuities for you depend on your life goals, your age, and your health. Here, we’ll take a look at some of the best annuities for each life stage and the ones you should definitely avoid.
Though this information is current at the time of publication, you should contact The Annuity Associates for the most up-to-date information and a more in-depth look!
What Are Your Goals?
First off, why do you need an annuity? If you’re looking to invest a large chunk of money you just inherited or won, you may need an immediate annuity. This annuity will turn your lump sum into a consistent income stream with less of a tax burden.
If you’re looking to save money for your retirement, where are you in your life now? How many years do you have to save, and how many years do you want to draw an income from the annuity?
What role will your annuity income play in your life? Will it be your primary source of income, or is it a bit of a sweetener for extras?
There’s no right or wrong answer to these questions, but the answers will influence what kind of annuity is best for you.
Annuities To Avoid
Most annuities out there are right for someone, even if they’re not right for you. But there are a few things that are bad for pretty much everyone.
As a general rule, you should only get annuities from A-rated (or above) insurance companies. The letter rating describes how reliable and financially solvent the company is- If you are going with a B-rated company, you are accepting a risk that the company will fail.
A B-rated company may offer certain annuity features that are great for you. However, you should work with a financial professional to make sure that you can’t get the desired features from a higher-rated company and to make sure you understand the risk.
If you’re not careful, annuity fees can take a big bit out of your future earnings. That’s why it’s so important to purchase annuities with the help of a licensed agent.
A professional will understand whether the fees on a particular annuity are in-line with the market. They’ll make sure you get the most for your money.
Best Annuities For Young Adults
Young adults looking at annuities should look for ones that have benefits for them now. A deferred annuity, for instance, will allow you to avoid paying taxes on your payments now (you’ll pay taxes once you get the money back as income).
You may also want to look at a flexible premium annuity. As the name suggests, a flexible premium means your payments are allowed to vary over time.
This means if you get a good bonus at the end of the year, you can squirrel it away in your annuity. On the other hand, you can make minimum payments if you need to spend your money elsewhere.
Younger people may also be more interested in variable annuities because of their higher risk tolerance. These are annuities where part of the money is invested in the stock market.
Best Annuities For Seniors
People who are close to or already in retirement have different priorities. Typically, the closer you get to retirement, the less risk you’re willing to tolerate. This means looking at fixed annuities.
You may also want an annuity with a death benefit to make sure your loved ones have the cash on hand for your funeral.
Annuities with a COLA rider (Cost Of Living Adjustment) may be right for you if you’re worried about inflation over the course of your retirement.
On the other hand, if you’re planning on big purchases early in your retirement, you may want an annuity that frontloads payments (sometimes referred to as a bonus annuity). This bonus payment can help you plan a house renovation or a big vacation.
Let Annuity Associates Work For You
If your head is already spinning from the terms mentioned in this article, relax. You’re not alone. Annuities can be incredibly confusing.
That’s why you should let Annuity Associates help you find the best annuities for your situation. Contact us today!