What are annuities? Why should you buy annuities?
An annuity is an insurance policy. When you buy annuities, you are paying a sum of money to the insurance company.
The insurance company will invest the money, so that it can pay you every month for the rest of your life.
There are many forms of annuities.
The immediate annuity means that the insurance company starts paying you the next month for the rest of your life.
Some insurance companies have a minimum age for the purchase of immediate annuity.
Most annuities do not pay immediately. There is a period of a few years between the timeyou buy annuities and the time you receive payout.
Why should you buy annuities?
You should buy annuities as part of the retirement planning.
If you have a windfall due to the death of a rich relative, you can use the money to buy immediate annuity. Once you buy the immediate annuity, you cannot touch the large sum of money anymore.
Annuity usually does not have cancellation policy, especially after it starts paying out monthly.
That is why you can prevent yourself from using up the sum of money.
If you are near retirement, you can use your savings to buy annuities. If you have a large sum of money, you can buy two annuities from two different insurance companies.
The two insurance companies will have different earnings from your money. You may see a bigger payout from one insurance company.
Most insurance companies will use the average lifespan to calculate the monthly payout.
If the average lifespan for women in your country is 80
That is why you should aim to live longer than that. Once you can outlive the average people, you are making the insurance company loses money. That is an achievement.
There is usually a guaranteed period in annuity plan. That means when you die within the guaranteed period, your children will receive the balanced payout in lump sum.
Different insurance companies offer different annuity plans. If you choose one annuity plan with ten years guaranteed period, you may want to buy another annuity plan with 15 year guaranteed period.
Before you buy annuities, you need to check the quotations from different insurance companies. One insurer can offer a few types of annuities, you need to think carefully before you buy annuities.
The minute you buy annuities, you lose the use of a few hundred thousand dollars. You need to park the money with the insurer for them to invest the money.
Scheng1 is a passionate blogger from Singapore. Rich in every sense reveals my deep desire in enjoying life, and be rich in every possible ways.