No, no, not a nudey. An annuity, silly! Get your mind out of the gutter, this is an insurance blog, remember? So, now you may be asking yourself, what is an annuity, and why should I pull my thoughts out of the gutter to think about it? Well, I’ll tell you why: an annuity is actually a pretty cool way to help protect yourself from the risk of outliving your income. This day and age, in this economy, that’s a real concern for many of us. An annuity can help you plan ahead. The simplest explanation is that an annuity is a scheduled set of payments over a predetermined period of time. The schedule and amount of the payments will rely largely on your individual retirement goals and the amount of time you have to prepare. It’s a long-term investment tool. The disbursements (or payments) from the investment serve as your retirement income. It’s often used as a complement to other retirement income sources, such as Social Security and pension plans.
The upside of annuities, is that they are flexible. You can choose one that enables you to invest a lump sum all at once to be paid out slowly, or you can build up your investment over a period of time. You can also decide if you want to start receiving payments immediately or start receiving them at a later date if your retirement is a ways down the road.
The biggest advantage of an annuity is that they allow you to sock away larger amounts of cash and defer paying taxes. Unlike other tax-deferred retirement accounts like 401(k)s and IRAs, there is no annual contribution limit for an annuity. That allows you to put away more money for retirement, and is particularly useful if you are close to retirement age and need to catch up.
The size of your payments are determined by a variety of factors, including the length of your payment period. You can opt to receive payments for the rest of your life, or for a set number of years. How much you receive depends on whether you opt for a guaranteed payout (fixed annuity) or a payout stream determined by the performance of your annuity’s underlying investments (variable annuity).
Just like obtaining homeowners insurance, planning for your retirement is an important part of ensuring you are financially secure for the rest of your life. Annuity policies are a great way of setting up a fixed or guaranteed income for your retirement.
Let Compass Insurance help you think outside of the box when it comes to protecting your future. Plus you get to say annuity over and over again. The more you say it, the funnier it gets. Annuity, annuity, a-new-ity, a nudey, a nudey, a nudey. Annnnnd we’re back in the gutter again. Give us a call today and try saying it. It’s fun!