The day that you’ve dreamed of has finally come, you’ve retired! While you are done with the stress of work, you now have to worry about the retirement funds you have saved and how they will last you the rest of your life.
If you bought an annuity, you don’t have to worry about running out of money.
What are annuity payments and how do they work? Keep reading to find out.
What Are Annuity Payments?
Annuities are designed to help workers grow their retirement income. It works as a long-term contract you receive from an insurance company where you’ll invest your money.
In return for your investment, you receive income in the form of regular payments.
There are various types of annuities you can choose from. It’s best to have a goal in mind so that a financial expert can tailor an annuity plan to fit your needs.
For example, you might be looking for income options, spousal protection, or legacy planning tools. The different types of annuities are:
- Variable annuity
- Registered index-linked annuity
- Fixed annuity
- Immediate annuity
- Fixed indexed annuity
Fixed annuities have the lowest risk while variable annuities have the highest. The others range between the two.
How Do Annuities Work?
So, what is an annuity payment exactly and how does it work?
Annuitization allows you to purchase payments through your investment contributions which are then converted into periodic payments that can last for life.
Depending on your contract, you can either invest through regular payments or with a lump sum payment. You can also decide whether or not to receive annuity payments immediately or over time.
Guarantees don’t apply to variable accounts so if you want less risk, choose a different annuity type.
If you don’t want to wait to receive annuity payments for your contributions, you can sell your annuity for a lump sum to a reputable company like We Pay More Funding.
Should You Buy an Annuity?
Most people buy annuities to create long-term income as they get older for retirement. However, annuities can benefit investors who have certain financial goals at any age.
Some of the top reasons to buy an annuity include:
- Long-term security
- Tax-deferred growth
- Probate-free estate distribution
- Death benefits for heirs
- Inflation adjustments
- Principal protection
To decide if you should buy an annuity, consider these reasons and consult a financial expert for advice. Always read the terms of the contract before making a final decision.
Annuity Payments: The Key to Long-Term Income
Annuity payments provide a predictable stream of income to those who want to fund their retirement without worrying about running out of money.
Yet, there are other reasons people opt to buy an annuity. These payments can help with various financial goals and situations.
Take what you’ve learned from the annuity guide to decide if buying an annuity fits your lifestyle. Check out other posts on our blog with financial tips!