It is very likely that majority of retirees will live longer than expected. As a result, they are worried that the money they have will not see them through retirement. This is confirmed by recent happenings in the stock market where retirees have watched their investments vanish into thin air.
The savior at your doorstep is in the name of an immediate income annuity. This plan has been devised by players in the financial industry to wipe out most of your fears and worries. With this product, you may be guaranteed to receive a monthly cheque during your lifetime. The retirement savings at your disposal will allow for establishment of an own pension scheme with the aid of an immediate annuity.
You enter an immediate annuity contract when you give your cash to an insurance firm with the guarantee of getting back your money later in life. This could be every month till you die or for an agreed period of time. Various factors will come in to determine the amount you will get back as your payments. Life expectancy is very important. If the contract includes your spouse, the age factor will have a bearing on the plan.
Consider the following before you purchase an immediate annuity
Control of your money: Be well advised in advance not to pour all your retirement savings into this plan. Experts recommend that you should take a small percentage from your retirement kitty and nothing more. Why? When you give out your cash, the deal is sealed. There’s no turning back. At no one time will you be able to withdraw money from the immediate annuity plan to handle other financial needs. This annuity is actually an irreversible purchase.
Your heirs: If you purchase an immediate annuity to sustain you during your lifetime, death will mark an end to the ongoing payments. You heirs are guaranteed nothing at all even if you had just bought the annuity. Notwithstanding, this barrier can be overcome in an easy way. Your immediate annuity can be structured to stretch beyond your lifetime. Firstly, go for a joint and last survivor annuity if in marriage. This plan guarantees payments for as long as either of the couple is alive. For singles that have beneficiaries, a clause that guarantees payment for a certain period can be added to the immediate annuity plan just in case death strikes before the agreed period elapses.
Inflation: In most packages, payments from these immediate annuities remain unchanged during one’s life time. A number of insurance companies offer a coat of living at a fixed level and you can choose this rider when buying your annuity. This in turn increases your annual income. Therefore, you have to surrender part of the income earlier so as to get bigger rewards in return.
Fees: No management fee is charged at the purchase of immediate annuity that is fixed. A variable annuity attracts other expenses.
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