Annuities Offer Security That Stock Market Lacks
Posted by: Guest Author / Category: Personal FinanceIn the wake of economic meltdowns that have affected the stock market recently, many people who had relied on their stock investments are now realizing the security offered through annuities.
People who had numerous stock options they were relying on for retirement have seen them washed away with the tide. Annuities, on the other hand, aren’t as risky. They guarantee a continual level of income in retirement and are backed against downturns in the market. Annuities are contracts through insurance companies that provide guaranteed income streams through the life of the holder. They provider safer alternatives for investors worried about market conditions or low returns on bonds.
There are two types of annuities, including an immediate annuity that pays similar to a pension, and a deferred annuity, which allows users to invest money on a tax deferred basis. Although deferred annuities are dependent on the stock market for their performance, there is usually insurance available to hedge against the investment taking a loss. Buy annuity, and you are taking a considerable lower risk than just investing money in the market.
Until recent changes, the one catch when you used to buy annuity was the fact that you might be stuck with it. You’d face high taxes and stiff penalties if you choose to sell the annuity. Luckily, over the last several years, selling annuity has enjoyed a growing market.
Many consider selling annuity just because they don’t need the payments anymore, or they’d like to take the money in a lump sum and invest it. Being able to put the annuity on the market makes annuities more appealing assets, as they are as good as cash but also a tax-free investment.
Any annuity can be put up for sale, providing its not held in a 401K or IRA account. You can even sell only part of the annuity if you just need a portion but not the entire package. The resulting cash can be invested towards health insurance or other investments.
You should be sure to understand how the gains will be calculated with the annuity. You should also check to see if there are any hidden penalties for taking the money out early. Older people should look for any rules that may prevent the money from being accessed for several years.
Annuities are sound investments that enjoy a more dependable security than the stock market. Recent market conditions have created a huge demand for annuities, making them easily salable. You not only get the security of a sound investment, you have the option of cashing that investment in early if you prefer the cash in one lump sum.
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