3 common annuity mistakes and how to avoid them

3 common annuity mistakes and how to avoid them

Annuities are a popular investment option that helps one get a steady stream of income during retirement. It is essentially a contract with an insurer in which one pays premiums and, in return, gets a guaranteed stream of payments in retirement. There are several annuity options, and choosing the right one can help one meet their long-term financial goals with ease. Also, one should avoid the following common mistakes associated with annuities:

1. Overlooking future tax implications
Annuities are not taxed during the accumulation period. However, these benefits are only available until one withdraws money from their annuity plans. So later, the retirement income earned in the form of annuities will be taxed. This can be an additional monetary burden at the time. To avoid this issue, one must not let all their retirement income be taxable. They must set aside certain percentages of their income and direct them to non-tax deferred retirement investment options.

2. Investing too much
While an annuity is a good investment option for retirement, it also tends to be rigid and difficult to get out of after a certain point. One can even end up paying penalties for several years after purchase if they miss a payment or two in the interim. Also, it becomes difficult for one to access their own money as it is locked away in an annuity plan and cannot be withdrawn due to the insurer’s rigid terms. So, the only way to avoid it is by not putting all of the money into an annuity plan. One should diversify their retirement portfolio, with annuity plans just being one among many other investments that will keep yielding returns.

3. Choosing the wrong type of payout
One should carefully review the payout terms of different types of annuities. For instance, with an immediate annuity, one can get a high annual payout. However, such policies do not come with the option of payments being made to the policyholder’s spouse after the policyholder passes away. In this case, one may want to opt for a payout type that involves regular, albeit smaller, payments for the spouse of the policyholder even after the policyholder dies. Taking such factors into account can help one make an informed decision.

  • Top 5 healthy foods for dogs

    Top Articles

    Top 5 healthy foods for dogs

    There are plenty of options when it comes to dog food. However, finding the right meal for your dog is not easy, as what works for one may not work for another. Plus a lot of dog food brands claim to be nutritious for your pooch but contain fillers and other harmful preservatives. Therefore, to ensure your dog gets only the best, we have put together a list of the top five dog food: 1. Orijen Original Dry Dog Food Orijen sources its ingredients from trusted farmers to create safe and healthy

    Read More
  • Popular smartphones worth buying in 2021

    Top Articles

    Popular smartphones worth buying in 2021

    A smartphone may last from a few days to a couple of years, but that's it. A phone's volatile lifespan depends on factors like how well it keeps up with updates, or sometimes, even how quickly or often we drop it on the floor. Also, it's an electronic device, so we will need a new one sooner or later. So, here are some of the best smartphone deals to check out if you're planning to change your phone in 2021. Apple iPhone 12 The Apple iPhone 12 is one of the best smartphones out there. It is

    Read More
  • 5 Types of Tactical Boots

    Top Articles

    5 Types of Tactical Boots

    Tactical boots are heavy-duty shoes specially designed to be used in rugged and extreme terrain. A good pair of tactical boots keeps your feet safe from harsh weather while also ensuring comfort. So, whether you are military personnel, a safety worker, or simply someone who loves venturing outback, here are some of the best tactical boots of 2021 to protect your feet. Bates Men's Ultra-Lites Side-Zip Tactical Boots Bates is one of the top brands in the segment, and their Men's Ultra-Lites Si

    Read More