Annuities are an effective way to receive an income after you retire. However, with many options available, it might be difficult to determine which option is the best for your family and to what extent you would like to mix annuities with other investments. There are a few things you will need to investigate before you purchase an annuity.
Consider Getting Inflation Protection
Determine whether the annuity has inflation protection or not. These annuities cost more money, but if you do not have annuity protection, your spending power will decline as inflation rises. However, overall, annuities tend to be better than bonds even if there is high inflation.
Find Out If You're Protected In Case The Company Fails
If the company fails, there is a risk that you will not receive your annuity payout. When selecting a company, make sure that it is very stable so there is less of a risk that it will fail. Fortunately, some companies are insured by the state, and those who hold annuities can be protected for up to 100,000. Find out if your state has a guaranty association to help determine whether you are exposing yourself to risk.
Determine If Your Survivors Will Receive Benefits
Find out if the annuity you are considering pays out benefits to survivors. Straight life annuities make payments for the period of annuitization until the recipient passes away. However, by keeping other investments, you will be able to overcome this limitation if you wish to purchase a straight life annuity.
Factor In The Interest Rate
Compare interest rates and factor this in alongside other benefits. You may be willing to accept higher interest rates if this means that your family will receive an income after you pass away. The benefit of an annuity is that they have stable interest rates as long as you do not withdraw a considerable amount of money from your annuity.
Remember To Change Your Beneficiaries
Remember to update the beneficiaries on your annuity if something changes. The benefit of an annuity is that the payments go directly to the listed beneficiaries while avoiding probate. However, if you make a modification to your will and forget to change the beneficiaries on your annuity, you may be sending money to someone you no longer intend to finance.
Purchase A Substandard Health Policy If You Are Sick
Even if you are in poor health, you can purchase a substandard health annuity. While these are more expensive, they also have larger payouts because of your lower life expectancy.