A fixed Annuity is a contract between the insurer and client, usually called annuity. The Treaty obliges companies to pay a fixed annuity payment for an annuity contract. Senior citizens often use fixed annuity to ensure a stable income for life. Annuity provides a lump sum of cash in exchange for a monthly payments that are guaranteed by the insurance company.
A fixed annuity, you can remove the market risk of the return on investment. However, there are other risks associated with Fixed annuities, which are to be considered.
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Wasting energy risk. Social Security retirement benefits – life adjustment value. Most Fixed annuities do not. Hence the purchasing provided monthly payment may decline significantly for the entire duration of the contract of annuity for inflation. Annuities inflation protection available, but they are much more expensive. So depending on how much retirement nest egg is used to purchase an annuity, thorough protection of purchasing an annuity payments.
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Risk of death and succession. In conventional fixed annuity after annuity became for a one-time premium to the insurance company, it will not be refunded. Annuity could die after just a few of the monthly payment, but the insurance company can need not give annuity property any money back. Risk-based financial implications for the surviving spouse. Standard single life annuity contract survivors receive nothing after the death of the annuitant. That could put a serious dent in the retirement income of the spouse. To counter this danger, consider joint life annuity.
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Company risk of failure. Private annuity contracts are not guaranteed by THE FDIC, SIPC or any other federal agency. If the insurance company issuing the contract of rent cannot be found, no one in the Federal Government must protect annuity from financial loss. Most States have the guarantee of that level of protection for citizens in this State if the insurance company to do business in a State. Typical restrictions of State protection, if it applies at all, is $ 100000. To manage this risk, please contact the State Insurance Commissioner confirmed that your State Association and learn from guarantees applicable to fixed annuity contract. Based on this information, we recommend that you split fixed annuity contracts among several insurance companies to obtain the maximum possible protection. Also check the financial stability and credit ratings of the insurance undertakings the annuity. A.m. best and Standard & Poor's publish ratings information.
Mark Patterson is an engineer, patent attorney, and author of baby boomer Secure pension system. He blogs about personal finance and retirement planning tough love money and go to pension.
Hi, Thanks for this awareness about buy fixed annuity. Will surely keep in my mind Thans much.
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