Determining the best financial plan to ensure your future security may seem like a daunting task, and some put off the process until it's too late due to this uncertainty. The plethora of options available to private investors may appear overwhelming at first glance, yet getting financial tips from an experienced banker, investment broker or knowledgeable source can help you pick out the details that work best for your long-term goals.
As a retirement strategy develops in this way, annuities may come up as an option to supplement income in the distant future. Setting aside money in an insurance fund can ensure ongoing payments so long as the agreement lasts, making it a good option for those looking for better financial security.
Understanding annuitiesAn annuity, according to the U.S. Securities and Exchange Commission, is a written contract between an individual and an insurance company that works something like a traditional plan, yet offers the flexibility of deferred payout. Take a certain amount of money or make payments toward a set final balance, choose either a fixed, indexed or variable rate and select the kind of investment path you want your money to take while in the insurance company's care.
Such a plan guarantees annuity holders a funding source in years to come when they may need it most. However, these investment tools are not savings accounts, so withdrawing money early could incur a big penalty. Buying into such a plan means waiting until the initial timer is up to get any kind of return.
Why they workIt may feel like annuities are just an alternative to bonds or certain mutual funds, but they offer a greater flexibility and peace of mind than these instruments. Investors picks the whole dollar amount, the payout rate and how long these agreements will last, even gaining returns through the end of that person's life.
Pete D'Arruda, an experienced financial planner, told CNBC that his clients' retirement plans usually have up to 40 percent placed in annuity holdings. The source wrote that more people are worried about economic stability and don't want to leave their futures to chance, so finding more market-durable investment strategies helps them feel their funds are protected, no matter what the global economy should do.