Most of you looking for a source of income during retirement are likely to be tempted by the attractive nature of annuity payouts. This should not be the case at all. Take enough time for soul searching to avoid any later regrets and misery. You cannot afford to fall into such a trap when actually you can keep off from the occurrence of the same. The truth however stands out that immediate annuities come along with great benefits that are very attractive indeed. Nonetheless, this should not be bait that will; lure you into making the biggest financial blunder in your lifetime.
Pros of Immediate Annuity payouts
The two main pros of immediate annuity payouts are a high payout and security of your investment.
High payout: There is a high likelihood of receiving a huge payout when you apply for an immediate payout. This will be determined by your current situation and the choices you make as an individual. For instance, 100,000 dollars worth of investment might earn you 700 dollars every month as payments in return. This figure is way beyond a return at 8 percent. Given the situation of the current market, it is just too good to be true; very appealing and attractive. Give this a second thought then finally say Yes or No.
Security: Although your income is not fully insured, the insurance company from which you purchased the annuity will provide the necessary backing. A sharp contrast exists if the current scenario is compared to what it used to be previously. However little it may seem, it is better than nothing. More so, the incoming payment is guaranteed irrespective of the unfavorable fluctuations in the stock market. You need not to worry because your income will still flow in unaffected. Your insurance company takes all risks and covers arising costs and expenses.
Cons of Immediate Annuity Payouts.
Having seen the benefits of immediate annuity payouts, you cannot downplay the flip side of this coin.
No access to capital: when you eventually make a choice to buy an immediate annuity, you have actually parted with your capital for good. Make no mistake of believing that the funds are at your disposal in case of an emergency. The contract cannot be reversed and so no cashing in is ever possible. Your income will flow in if the company continues operating .any attempts to alter the monthly payment or get more returns in case of an emergency will bear no fruit however much you try. You will be forced to resort to other sources to handle the emergency.
Your payout isn’t the return your money earns: whatever you get back in form of income is the sum of principal and interest. Though it might pass unnoticed, a large percentage of what you receive yearly actually comes from your investment and not the returns. Given a close look, it is clear that the returns are a paltry 3.2 per cent this is not worth taking the risk since the market might experience a drastic rise in interest rates even before your annuity matures.
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