Annuities have been a trending investment option in recent years. Let's get to know more about fixed indexed annuities and top 5 reasons to choose the same.
Summary – Annuities have been a trending investment option in recent years. Let's get to know more about fixed indexed annuities and top 5 reasons to choose the same.
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We all know the increasing role of annuity insurance plans and the importance of having such a plan for our retirement. Let's try to understand what a fixed annuity plan is and why you should consider it once.
What Is Fixed Index Annuity?
Under these plans, you are supposed to make a fixed premium at regular intervals and the insurance provider will provide a consistent monthly income when you retire. As an annuitant, you have the option to choose how frequently you want to make these premiums. As per your comfort, you can choose to pay monthly, quarterly or even yearly. These plans prove a very beneficial option to ensure a consistent income during the later years of life and take care of their essential expenses when you need it the most. You can choose to receive a fixed monthly income immediately by making a lump sum amount or pay a fixed premium to receive the same after certain duration. Below, we will get to know different benefits available as well as the reasons to buy a fixed annuity plan.
Tax Deferral Options
The offered option falls under the most advantageous benefits under a fixed annuity plan. Usually, you need to pay your income taxes on your every investment, but annuity plans are different. Under these plans, you get a deferral from income and investment-related taxes. This means you don't need to pay any taxes till you withdraw the accumulated amount. This can help greatly as people have a very limited source of income during the later years of their life. These plans can be purchased by requesting annuity insurance quotes on the official websites of insurance providers and you can decide on the one after comparing different relevant plans.
Reasons to Buy This Plan
Annuities plans have in talks for different benefits they come with for long. Let's get to know why one should consider buying a fixed annuity plan.
1. Compounded Earnings with Tax Deferral
Under these plans, the amount you invest gets grows over years and you received increased earnings during your retirement. This means you earn a monthly income more than the monthly premium you paid while you were working. This increased income also helps to deal with inflation as prices rise over the years. Also, you don't need to pay any taxes to Govt. on the amount invested in annuities and your money gets accumulated very quickly.
2. Higher Interest Rates
Another benefit that annuities for retirement bring is the interest rates on the amount invested. They are known for providing a higher interest rate on the amount invested in annuities rather than any other financial institution. This helps the invested money grow faster than others and helps the annuitant receive a bigger amount than expected. As the prices of commodities rise over the years, this helps the retirees take care of their essential expenses and plan their future efficiently.
3. Invest in Tax-Deferred Accounts
This may seem trivial while hearing but this isn't one. Usually, you are taxed on every investment in any financial institution and lose a decent amount of your hard-earned money. This may not affect much while you are earning a good salary but when you retire and have limited monthly income to spend, these deductions will hurt you. But, annuities plans are an exception form these deductions and provides a tax deferral on your money and allows to invest any desired amount in annuities.
4. Retire Early, Easily
Owing to the higher interest rates annuities provide, the amount invested in these policies grow more quickly than other investments and helps the annuitants with an accumulated amount in their accounts. This can prove helpful if you are planning to stop working due to some reasons. Also, if you feel that the accumulated amount to enough to take care of essential expenses, you can consider retiring early and spend the late years of your life peacefully.
5. Probate-Free Inheritance
Another advantageous benefit form fixed indexed annuities. Whenever you buy a fixed annuity plan, you don't need to be worried about to whom your assets will be transferred after you. Usually, there is the process named probate that is used to ensure that the descendant receives their due share in the estate and that sis distributed lawfully among all the descendants. Sometimes, the process takes too much time and requires much patience for the same. If you have bought an annuity plan your beneficiaries will be automatically considered your descendants.
