While you get a larger annuity payout when interest rates are higher, they are still a good investment choice even in this low annuity rate environment. In “An annuity can still make sense,” Andrea Coombes of The Wall Street Journal says that this is still a good time for annuity purchases. An immediate annuity helps to protect you against two major retirement concerns. The first is that a drop in the stock market will cause you to lose all of your savings and the second is that you will run out of money during your lifetime.
If you haven’t saved enough money to carry you through retirement, an annuity is not going fix that problem. But an annuity will ensure that the money you have saved, especially that money in your 401k, will last over your lifetime. The monthly payments you receive will depend on the amount you use to purchase the annuity and many other factors, but it’s like a budget so that you know how much you will have to spend on expenses each month. Some people choose to add an annuity rider to adjust for inflation or continue death benefits to their heirs in case they die sooner than anticipated.
Variable annuities with guaranteed income might be a better choice for people who want to maintain some control over their money. With a variable annuity, you get to choose the sub-accounts in which you invest your money through the insurance company. Make sure to find a lower fee variable annuity because there are some products that charge high fees. State guaranty associations cover annuities in the case that an insurance company is unable to fulfill their obligations, so make sure that your state covers the entire amount of your annuity purchase.
Written by Rachel Summit
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