Yes most of us know what an insurance company can do for us, have you ever been taught of this section of insurance called insurance companies annuity; the question is, what is an annuity and how does it help out in the life of people?? Annuities are contracts issued and distributed by financial institutions where the funds are invested with the goal of paying out a fixed income to the persons involved. On another note, annuities are designed to help you grow your retirement income. They’re long-term contracts from an insurance company where you invest your money in return for your investment, you get income in the form of regular payments.
I guess we all know that they are mainly used for retirement purposes and help individuals address the risk of outliving their savings.
Annuities make the most sense for individuals with longevity in their families, example- individuals likely to reach the age of 90, a lifetime income stream is essential for them.
Annuity products are regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
Agents or brokers selling annuities need to hold a state-issued life insurance license, and also a securities license in the case of variable annuities. These agents or brokers typically earn a commission depending on the value of the annuity contract.
Finally, Annuities are appropriate financial products for individuals seeking an economical, stable, guaranteed retirement income.
FAQS: frequently Asked Questions About Annuity Providers
What is an annuity provider?
Annuity provider is either an insurance companies, independent brokers, banks and other financial entities providing financial assistance to its contract holders. However many organizations sell annuities, only an insurance company can formally issue the annuity contract.
How do you choose the best annuity provider?
You go through this through Research, reputable providers with high ratings and compare the providers based on your financial needs. Then look for providers with up-to-date listings on the best annuity rates and available products.
Can I buy annuities directly?
This is possible, You can purchase an annuity directly from a reputable provider; however, most annuity purchases occur through an intermediary, such as an independent agent or financial advisor.
Annuities and Annuity concept (Insurance companies Annuity)
People worry about how their retirement could turn out to be like, considering the fact that it can annuity can lead them through their retirement years.
Annuities were developed to help alleviate these concerns, therefore annuity is essentially a contract with an insurer, where individuals agree to pay the company a certain amount of money, either in a lump sum or through installments.
However, you must know that these payments often last for a specific time span say, 10 years, some annuities company offer lifetime disbursements.
The number of annuity products keeps on upgrading over the years, this is true for fixed contracts that credit your account at a guaranteed rate, as well as variable contracts,.
Also, returns are attached to a basket of stock and bond funds, there is even indexed annuities, where performance is linked to a specific benchmark, such as the S&P 500 Index.
Considerations for Annuities
Unluckily, as with permanent life insurance policies, annuity products also command substantial upfront commission fees that can erode long-term gains.
They also feature high surrender fees, which are essentially penalties investors must pay for prematurely withdrawing funds from an annuity contract, or canceling it altogether.
For younger investors, variable annuities are only prudent if they’ve already maxed out their 401(k) and IRA contributions.
Qualified annuity contracts are those held in IRAs or other tax-advantaged retirement plans, like 401(k)s. A qualified annuity is funded with pre-tax dollars, and a non-qualified annuity with post-tax dollars.
Qualified annuity contracts are subject to the same early withdrawal penalty and required minimum distribution rules as other investments in qualified retirement plans.
Top Benefits of annuities (Insurance companies Annuity)
1. Provides an alternate way to save
An annuity can help you save additional money for retirement once you’ve maxed out other tax-favored investments.
2. Lets you catch up
Annuities can help you catch up on retirement savings when you have less time to save.
3. Offers growth potential
Annuities offer potential for tax-deferred growth and an income stream for life.
Factors to consider when choosing an Anuuity
- Yearly fees and other administrative fees.
- Minimum guaranteed return.
- Rating from an independent ratings company like Standard & Poor’s, Fitch, AM Best, Moody’s, and TheStreet.com.
- Death benefits.
- Surrender fees, should you choose to withdraw the funds early.
- The provider’s financial health.
- Online reviews.
A little difference between Life Insurance and Annuity
Both annuities and life insurance should be considered in your long-term financial plan. While both include death benefits, you buy life insurance in the event you die too soon and an annuity in case you live too long.
In other words, life insurance provides economic protection to your loved ones if you die before your financial obligations to them are met, while annuities guard against outliving your assets.
Annuity can be purchased from (Insurance companies Annuity)
- Independent broker-dealers, like Raymond James.
- Large banks, such as Bank of America.
- Annuity distributors, including large brokerage firms known as warehouses, such as Merrill Lynch and Morgan Stanley.
- Mutual fund companies like Vanguard and T. Rowe Price, which are considered some of the most competitive companies because they offer lower fees
- Thousands of independent agents, brokers and financial advisors across the country.
NOTE: If you purchase an annuity from one of these middlemen, normally you will continue to work with them directly as you manage your contract.