Annuities | Up North Retirement

An annuity is a financial product that allows consumers to receive a fixed stream of payments in the future in exchange for them making premium payments first. They are commonly used as a tool to set up stable retirement income during one’s working years. If you are curious about the benefits of annuities, here is what you should know. 

Annuities help people who are concerned with the risk of outliving their savings. By paying into the account now, you can set yourself up to receive ongoing payments or a lump some payment in the future. This money can be used to pay for anything, including living expenses, transportation, and health care.

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Annuity products are best for people who can afford to spend a little extra money in their younger years to set themselves up for a comfortable future. Annuities aren’t incredibly expensive, so someone that earns a moderate income can likely afford to invest in one. They are also ideal for people who have not saved up much, but are approaching retirement soon. With an annuity, people like this can ensure that they have access to a stable income in addition to their Social Security benefits.

There are several types of annuities, each offering different cost and payout structures. These are the most common types of annuities:

Fixed Annuities 

These annuities pay guaranteed interest rates and in some cases you can defer income or draw income immediately. This option is good for people who want a simple, guaranteed fixed investment. 

Variable Annuities

These accounts allow owners to opt into a select set of subaccounts, or mutual funds. The performance of the mutual funds dictates the value of the account. This type of annuity is a strong option for people who want guaranteed lifetime income that has a possibility to grow over time. 

Fixed-Indexed Annuities 

With this type of annuity, a variable rate of interest will be added to your contract value if an underlying market index tied to the account is positive. There is usually a guaranteed minimum income benefit. Be wary that with this type of account, you may be unable to earn the maximum return in a robust market. Though, your investment can still grow if conditions are correct. 

Immediate Annuities 

An immediate annuity is a unique product that provides people with a lump sum payment up front, in exchange for regular payments until death, or for a specific period of time. Payments are often higher than those required by other types of annuities, because interest and principal amounts are included upfront. 

The Benefits of Annuities

Annuities can allow you to set up a regular income stream that won’t run out later in your life. This can create significant comfort for you in your later years, so it is important to consider investing in an annuity now.