Retirement and Annuities
If you have retired from full time work and you want to get payments for a predetermined amount of time where the tax has been deferred then you need to look at an annuity. As with any type of investment, research is important, particularly when such a potentially large amount of money is involved, after all, you do not want to be taken by surprise with hidden clauses. More and more people are living into their 80’s and that means they can spend as much as a third of their lives in retirement.
Being aware of the good and bad points of annuities is essential.
You should think about an annuity for tax deferred income once you have put in as much as you can into a Roth/Traditional IRA or a 401K. It is the possibility of a good level of income from an annuity that are appealing by virtue of the fact that they are also tax deferred. The tax benefits can be wiped out with high fees and this is one of the cons that needs to be thought about. As with all investment plans there are admin costs which can eat into profits but surrendering the plan early can also be costly to the annuity holder.
It does not take long for these fees to mount up.
Without doubt this is an important aspect about your decision for the type of annuity you take out.
One option is to have a reverse annuity mortgage which permits you to remove funds (tax free), although this is in reality borrowed and the value of the mortgage will be used to get it back at a later stage. To many retired people, this is an appealing aspect of an annuity. Personal and medical expenses can always arise and this facility will provide low income seniors with a tax free financial aid and stability for the rest of their lives.
Although, when a reverse mortgage annuity is taken out, the holder must be made aware that in the event of their death, their real estate becomes the property of the annuity lender. Another downside is that the stipulations for a reverse annuity mortgage are rigorous where banking companies are involved. It is vital to understand the fine print of your annuity policy, so you are well informed as to what happens to the (in this case) reverse annuity mortgage when the policy holder dies.
As always, expert financial help is available, so if you want to know the ‘ups and downs’ of annuities, and if they are right for you, get hold of a reputable financial adviser. Your individual needs must addressed plus the pros and cons need to be explained in layman’s terms, which is something only a financial planning professional is capable of doing.
