How many retirees that you know have a pension? Interestingly, more than 80 percent of today’s retirees receive some income from a pension plan. However, as you’re probably aware, pensions are becoming less common as companies shift their retirement plan offerings to a 401(K).
So where do annuities fit into the equation? Before we answer this question, we must first provide a general explanation of annuities. Here’s the thing: An annuity accepts and grows funds from an individual and then pays out a specified amount each year.
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As explained by Selena Maranjian of The Motley Fool, buying an immediate annuity is “kind of like buying a pension.” So are immediate annuities really worth your hard-earned savings? Keep reading as we dissect the pros and cons of purchasing this long-term income.
Why you should buy an immediate annuity
Think about your nest egg for a moment. For decades, you’ve worked tirelessly to build your savings and create a diversified investment portfolio. Be honest with yourself, though.
Is there a chance you might run out of money later in life? Then an immediate annuity makes a lot of sense. Whereas traditional investment and retirement accounts offer many advantages, the majority can also decrease in value if the market crashes.
Contrary to popular belief, immediate annuities are a form of insurance as opposed to an investment. Dana Anspach of The Balance says, “When you buy an immediate annuity, you are ensuring a particular outcome, not making an investment. The outcome you are purchasing is lifelong income.”
A guaranteed stream of income sounds nice for anyone, especially those just about to retire. But how much monthly income should you expect to receive? Keep in mind that the insurance company decides the amount based on the type of annuity, the term you chose, as well as other factors such as age and gender.
Why an immediate annuity might not be right for you
At Tactical Wealth, we always have your best financial interest in mind. You can count on us to evaluate your specific situation in life and determine from there whether or not an immediate annuity makes sense.
Some people have already established sufficient income streams for themselves and that’s great. Again, though, if you’re at all concerned about burning through retirement and savings accounts quicker than initially expected, you may want to consider the stability that comes with immediate annuities.
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We have yet to mention that annuities generally carry high annual investor and commission fees. Plus, not only are investment annuities difficult to understand, but they come with low-interest rates (not much bang for your buck). What if there was a way to take advantage of what immediate annuities have to offer without dealing with their challenges?
In comparison to annuities, the Tactical Wealth Fixed Income is far superior. Have doubts for whatever reason? Then be sure to watch the video above and see why more retirees are choosing our Fixed Income Fund more now than ever before.
If you’re still struggling to grasp the concept of annuities, then check out ‘Annuities For Beginners.’