Getting The Best Value From Annuities
If you have a retirement pension that pays you a fixed income every month for life, consider yourself lucky, but employers have been getting less generous with these kinds of benefits over the years, so most people do not have employer-provided pensions. The closest thing you can do to buying a pension is to buy an annuity. Another way of thinking about annuities is that they are like life insurance policies that dispense the payout in monthly installments while you are alive. Whichever metaphor you use, annuities are a very reliable form of guaranteed income, but at the price points that most working people can afford, the monthly payment you get from an annuity is not enough to cover all your living expenses. It is not a good idea to buy an annuity with the assumption that it, by itself, will afford you a comfortable retirement, but it is a good idea to buy one to diversify your income streams. For help choosing the best annuity for you or making the most of the income you will receive from an annuity you have already bought, contact a Tampa estate planning attorney.
How Do Annuities Work?
When you buy an annuity, you pay a lump sum of money to an insurance company, and the insurance company invests it. When you are 59 years or six months old, you become eligible to start collecting monthly payments from your annuity. The amount of your payouts is typically a little less than five percent of the amount of your initial investment. For example, if you invest $100,000, you might get an income from the annuity of $400 per month, adding up to $4,800 per year. The amount of the payout based on the amount you invest is calculated at the time you buy the annuity and based on actuarial tables. Therefore, your age and health play a role, so you might have to answer health questions or undergo a medical examination, like when you buy a life insurance policy.
Important Questions to Ask Before Buying an Annuity
These are some questions to consider before choosing which annuity to buy:
- Can you designate a beneficiary to receive death benefits from the annuity?
- How much control, if any, do you have over how your money is invested?
- How much are the penalties for withdrawing funds early?
- Is the monthly payment amount fixed or flexible? Will the company adjust your payout amount based on inflation?
- Does the annuity designate certain funds for long-term care?
An estate planning lawyer can help you weigh your options about annuities and other retirement income streams in more detail.
Contact David Toback With Questions About Setting Up Your Retirement Income
An annuity can give you guaranteed income, but it will not make you rich. A Central Florida estate planning lawyer can help you invest your money so that you can have multiple income streams during retirement. Contact David Toback in Tampa, Florida to set up a consultation.