An annuity can be a great retirement investment vehicle. Annuities have some of the same benefits as other retirement plans such as the 401K plan or an individual traditional IRA. An annuity typically doesn’t have contribution limits, income limits, or mandatory withdraws like the other plans. Even though with an Annuity your after-tax dollars are used for contributions, the retirement earnings still grow tax-free.

Types of an Annuity

There are two types of Annuities, fixed annuities and variable annuities. A fixed annuity gives you a pre-set interest rate on earnings which is guaranteed for a certain term. Variable annuities are invested among stocks, bonds, and money market accounts similar to a 401K plan or a traditional IRA.

Advantages of Variable and Fixed Annuities

Not only are Annuities a retirement vehicle, they also carry an insurance component. Depending on the policy you choose, there are insurance choices available to you such as guaranteed death benefits, guaranteed payments for as long as one lives, or even payments for the life of your beneficiary.

Who are Annuities Suitable for?

People that have already maxed out their 410K plan or traditional IRA and have additional capital to invest would be an ideal Annuity candidate. Another suitable person would be an individual who has retired and fear they might outlive their money. A Annuity would give a retiree a guarantee income for the rest of their life. Anyone who is looking to protect their finances would also be a great candidate because the fact that annuities are a type of life insurance means they are immune to litigation.

Purchasing a 401K plan, Traditional IRA, or Annuity

When purchasing any investment such as a 401K, IRA, or annuity, it is important that you conduct a good deal of research and chooses a strong, reputable company. And, since all annuity policies are different, the policy holder will want to compare and understand all fees, surrender charges, and tax advantages of their particular annuity policy.