Nov
8
Fixed Annuities: What to Consider When Choosing The Right One For You
November 8, 2009 | Leave a Comment
If you believe all fixed annuities are exactly alike, think again. Fixed annuities have different options and rates to fit almost everyone’s needs. The key to finding the right annuity is getting annuity quotes that to find the one that’s best for your situation. An annuity quote helps you eliminate some of the products that don’t fit your situation and find those that pay you the most money. In addition to increasing your return, there’s even more good news, annuity quotes are free.
There are thousands of fixed annuities available with each one offering you something special. Of course, what you’re most interested in is the rate of return for your money. The way you use the annuity makes a difference on the contract that makes the best sense for your needs. Checking several different annuity quotes helps you do this.
They use the annuity as a deferred annuity and need a different type of program than the person that takes periodic payments or wants only the growth from the annuity. An annuity quote helps to narrow the playing field to your specific needs.
Of course, if the person selects a deferred annuity, it doesn’t mean they never want payments from the contract. They may want to avoid taxation until they retire and then take payments later. This is possible. If you select deferring payments, check both the immediate interest rate and the guaranteed rate.
The immediate rate is normally a higher rate of interest than the guaranteed rate. The guaranteed rate is the lowest return the company can give you. This makes the product superior to CD’s that have no guarantee on renewal, particularly in times of lower interest rates. Look at not only the high immediate rate but also the length of time they pay it and the guaranteed rate of the contract.
Surrender fees are important if you want to take a lump sum distribution. A surrender fee is the percentage the company charges when you take funds before a specific date. Most of the time, the surrender charge is between four and seven years. However, the penalty phase may be as short as one year or never end unless you annuitize. This makes a huge difference in your return if you select a contract not appropriate for your needs.
Just because you’re within the period of surrender fees, it doesn’t mean that the money is unavailable if you have an emergency. Like a CD, you can remove all your interest without penalties on most contracts. Unlike a CD, however, most companies allow at least a ten percent penalty free withdrawal once a year or at least once in the contracts lifetime. Look for the penalty free withdrawal ability on the annuity quotes. It means you don’t have to keep a lot of emergency money in a low interest taxed savings account.
Remember that if you remove funds from an annuity before you’re 59 , the government also imposes an early withdrawal penalty. The penalty is equal to ten percent of the growth in the policy just as it is for any other type of retirement account. One way to avoid this is to take systematic payments for five years or until you turn 59 , which ever is longer.
For those that want an immediate payment, the best method to find the highest payout is through securing annuity quotes. Just because the product offers the highest rate of return for deferred money, doesn’t mean it offers the highest payment. That’s a different interest rate. An annuity quote gives you the exact amount of money you’ll receive. The difference could be thousands of dollars over the lifetime of payments.
John C. Ryan has authored hundreds of articlesto educate investors of their options for annuity insurance. Annuity insurance is a major decision for most retirees Click on the links to receive more information, and the latest, best annuity quotes
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