Pros and Cons of Various Annuities

Seniors normally use annuities after they have retired if they wish to receive money for a predetermined amount of time where the income tax burden has been put off. As with any sort of investment, research is important, especially when such a potentially large amount of money is involved, after all, you don’t want to be taken by surprise with hidden clauses. For a lot of people, a large amount of their lives is spent in retirement, in fact anything up to a third now that so many are living into their 80’s and beyond.

Being aware of the good and bad points of annuities is important.

Annuity Settlement

Once you’ve invested what you can afford in your 401K, Roth IRA and Traditional IRA, an annuity is one other choice for tax deferred payments to be made when you retire. Annuities are attractive to people as they have the dual benefit of giving back a good income plus the tax on them is postponed. The tax benefits can be wiped out with high fees and this is one of the cons that needs to be considered. There are setup and admin fees to be aware of and if you need the cash sooner than you anticipated, there are what’s called, “surrender fees” that are, not surprisingly, pricey.

It does not take long for these fees to mount up.

Your choice of annuity will depend on your level of knowledge of these fees.

Annuity Payout

One option is to have a reverse annuity mortgage that lets you to remove funds (tax free), although this is actually borrowed and the value of the mortgage will be used to reclaim this at a later stage. For seniors who wish to carry on enjoying their lives as they did before, this alternative within an annuity can be very valuable. Personal and medical costs can always arise and this facility will give low income seniors with a tax free fiscal aid and stability for the rest of their lives.

Midland Annuity

In a reverse mortgage annuity situation however, on the death of the plan holder, the lender will get control of their property and is something you need to be mindful of. Another downside is that the stipulations for a reverse annuity mortgage are strict where banking companies are involved. As there are so many conditions, particularly when the policy holder of a reverse annuity mortgage dies, it is essential they carefully study the small print in detail.

If you would like to know more about annuities good and bad points, in an effort to work out if an annuity is the right choice for your retirement fiscal planning, you should ask the advice of a qualified financial planner. A financial planning professional will be able to explain the benefits and potential drawbacks in layman’s terms, with the focus based on your personal needs.