Used correctly, immediate fixed annuities are a good tool for planning your finances. Though some financial planners give such products a negative review, overcoming their limitations can be accomplished with proper planning and education. Immediate annuities provide a fixed income to their owners for a designated time period.
Starting with a paid, lump sum premium amount into the annuity, beneficiaries receive regular monthly payments. This varies by the amount, number of payouts and contract length. The account owner can decide whom their beneficiaries are, often naming themselves. Spouses are also common designated persons.
One main drawback to fixed annuities is the expensive fee charged for leaving a contract early. Expect to pay a steep service charge if you decide that you need your money earlier than the determined schedule for payment. Another problem is the suitability of the product for various situations.
You can increase the benefits of an annuity by understanding how the product works and what you may encounter by opting out early. A general use for immediate annuity contracts is funding insurance premiums. Receiving regular payments lets the policy owner get a determined amount of funds over a set time frame. At the same time, payments into an insurance policy are also predictable and consistent. When designed for this purpose, a smart way to use the annuity is for making these insurance payments.
Before implementing such a plan, carefully consider all of the parts and implications. Look at the variables including, penalties, fees and tax consequences. If you have any questions, be sure to consult a professional. They will be able to fill in the gaps of understanding, and allow you to make an educated and informed decision. It never hurts taking advice when it comes to your hard-earned money. You worked hard to earn, you should work hard to keep it.
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