Knowing Annuities Pros and Cons
I believe that all of us want to be secured financially after we retire, and there is none of us wants to outlive our money. These are the factors why investors prompted to explore annuities. And annuities pros and cons must be thought about.
Let’s talk about the advantages first regarding the annuities pros and cons. Annuities do provide you tax benefits, yet you should understand the difference between immediate and deferred type. Immediate provide fixed payments until specific event happens, while deffered type provides you with compunded interest on a tax free basis until you made the payouts through withdrawal.
Investing with Variable Annuities: Fifty Reasons Why Variables Annuities May Be Better Long-Term Investments Than Mutual Funds
by: John P. Huggard
publisher: Parker-Thompson Publishing, published: 2002-06-01
ASIN: 0971497702
EAN: 9780971497702
sales rank: 1047502
price: $99.00 (new), $8.49 (used)
Annuities are not cheap to purchase. The insurers companies must provide recovery for a commission on the annuity plan paid to its agent. The number is usually around 5% and 10% of insurance premium you pay. The insurers must also provide recovery for maintenance and ancillary benefit costs. These are some examples of cons in annuities pros and cons.
Other cons examples in annuities pros and cons are that annuities are illiquid. And then, you can only withdraw the money with surrender charges imposed while you can easily add funds.The charges range differently depending on the contract term, yet usually it will be higher if the commision for the insurance agent is high.The withdrawals are also subject to penalty taxation if you do this before the plan owner reaches 59.5 years old.
Other cons of annuity pros and cons is the tactics that is known as ‘bait and switch’. Some insurance companies issue annuities in form or type of deferred fixed and have the discretion to credit the interest rates as they see fit. Such companies can lure buyers with high initial rates, yet then reduce the rates extremely after a certain time period. The policy holders in these cases may be stucked since they are affraid of high surrender charges.
Originally posted 2011-08-29 22:06:15. Republished by Old Post Promoter
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