What is an Annuity and How Does it Work?

What does retirement look like for you? Is it right around the corner, in the near future, or far out of sight? No matter what your answer may be, you should consider looking into an annuity. These financial tools can be a great way to augment or supersede traditional retirement savings. There are many different options to look into for saving, but an annuity could be the best option for you. If you want to live comfortably in the years after retirement without worrying about financial issues, then keep reading to find out how an annuity works.

What is an Annuity?

An annuity is a financial tool that helps enhance retirement plans that will allow you to grow your income and create more wealth for your life after retirement. To create an annuity, you will make an agreement to a fixed amount of money that you will receive on a regular basis over a period of time. This money will act as your monthly income once you retire. Annuities can last you a lifetime so you can be certain that you will never run out of money.

Who Needs an Annuity?

You may hear the word “annuity” and think it only applies to people who are nearing retirement, but it is actually for everyone. For young adults, annuities are a great way to grow your wealth to the max. For retirees, annuities are a source of constant income that you can rely on. Below are some benefits of having an annuity:

  • Taxes: Earnings in an annuity compound are not taxed until you start making withdrawals.
  • Investment Protection: You may have to pay a fee and, in return, your investment will be protected from any crashes within the market.
  • No Tax Consequences: If you choose to change how your fund is being invested or you choose to rebalance your fund, you will not be charged with a tax penalty.
  • Lasts a Lifetime: The money you receive on a monthly basis comes from your own investments and its earnings, as well as other people’s investments that are pooled from numerous amounts of people who do not end up living as long as they were expected to.

What are the Different Options?

There are a few different options to choose from when deciding on an annuity. Immediate annuities allow you to take out a lump sum and create monthly payments that will last you for life. Deferred annuities allow you to create monthly payments that will last you a lifetime, but they have an accumulation period in which you have to wait for the payments to start.

When to Get an Annuity?

Since there’s no maximum contribution limit, annuities are excellent for people who are generally wealthy and have additional money to put away, but they can also appeal to young adults as well. The sooner you start to save for retirement, the more your benefits will start to add up. People who are concerned about whether or not they will have enough money to last them after retirement should start thinking about annuities sometime between the ages of 45-55.

Why Get an Annuity?

There are so many reasons why everyone should consider getting an annuity. Read below to find out why.

  • Long-term care and long-lasting income
  • No worries about financial security
  • Ensures that you will not outlive your money
  • Guaranteed money for the rest of your life
  • Stress-free and worry-free life after retirement

Annuities are a great option for everyone. Start looking today and do your future-self a favor. The TJ Woods Insurance Agency takes pride in our expert insurance and financial services. We are here to connect you with the best policies that are perfect for you and your loved ones. Want to learn more about annuities? Get your free quote today and contact us with any questions.