With advances in medicine and technology, it’s becoming more and more of a possibility that you may outlive your income. Household income had increased by 26% in the last decade, but so has the cost of living. If you’re worried about outliving what income and savings you do have, an annuity may be the right investment.
However, there’s a lot that goes into an annuity and you may not have all of the information you need right away. So whether you’re looking for a refresher or preparatory information, here’s what you need to know to make annuities work for you.
What is an Annuity?
Annuities are long-term investments issued by insurance providers to assist people who fear that they may outlive their current income stream. These long-term investments come in varied lengths and payout periods, but the most common are those paid over the course of 25 years or for life. Most people choose to invest a lump sum up front, and then manage a smaller payment into their monthly expenses.
How Can Annuities Help Me?
In the event of your passing, a structured settlement annuity could help your family in the future. Approximately 26% of Americans report not paying their bills on time, and the average household pays a total of $6,658 in interest annually. By investing your money in an annuity, or even allowing your family to sell your annuity, you could be relieving them of a potentially large debt burden.
What Type of Annuity is Best for Me?
There are multiple types of annuities, but the most common are variable and fixed. A variable allows you to place investments in different places and earn rewards based on their results. This is better for those who have a higher tolerance for risk. Fixed, on the other hand, requires you make fixed payments for the duration of the contract period.
Investing in annuities is a serious financial choice, and should not be taken lightly. Many people choose to sell their annuities if they don’t perform the proper research. Whether you’re buying or selling, be sure to have all of the proper information available to you.