Pros and Cons of Various Annuities
If you are retired and you want to collect payments for a predetermined amount of time where the tax has been deferred then you should look at an annuity. As with any sort of investment, research is important, especially when such a potentially large sum of money is involved, after all, you do not want to be taken off guard with hidden clauses. For most people, retirement is a long period of their lives, in fact anything up to a third now that so many are living into their 80’s and beyond.
Being aware of the pros and cons of annuities is important.
You should consider an annuity for tax deferred income once you have placed as much as you can into a Roth/Traditional IRA or a 401K. It is the potential of good levels of income from an annuity that are appealing by virtue of the fact that they are also tax deferred. Although, the fees attached to these plans can be high and might wipe out any tax rewards that they ordinarily bring with them. As with all investment plans there are admin costs which can eat into profits but giving up the plan early can also be costly to the annuity holder.
It doesn’t take long for these fees to mount up.
It is vital to be aware of all of these sorts of fees when taking your annuity.
If you have a home loan you can take out ‘borrowed’ tax free payments when you take out a ‘reverse annuity mortgage’. When considering the annuities pros and cons, this pro can be very appealing. Personal and medical costs can always arise and this facility will give low income seniors with a tax free fiscal aid and stability for the rest of their lives.
Although, when a reverse mortgage annuity is taken out, the holder must be aware that in the event of their death, their real estate becomes the possession of the annuity lender. Banks do have very strict requirements for anyone applying for the reverse annuity mortgage. As there are so many stipulations, specially when the policy holder of a reverse annuity mortgage dies, it is essential they carefully study the small print in detail.
Your first stop would be a financial adviser if you would like to know more about the good and bad points of annuities and if this is the right choice for you when you retire. A financial planning professional will be able to show you the benefits and possible drawbacks in layman’s terms, with the focus based on your individual needs.
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