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How To Make Money With An Annuity

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Making Money With AnnuitiesPurchasing an annuity is a smart way to save money.

It’s also a great way to set up a guaranteed stream of income in retirement. You will create reliable returns and give yourself peace of mind as a part of your investment portfolio.

Ultimately, the question arises – how do I get paid from my annuity? Below we explain how to create, grow and profit from these dependable accounts.

What Is An Income Annuity Policy?

Also known as immediate annuities, these products allow for guaranteed payments after one month. In other cases, the income might begin after several months or years. It’s up to the owner as to when they want to begin their income stream. The longer they wait, the higher the income.

Payments can be received monthly, quarterly, semiannually or annually.  This type of annuity is common among those who are nearing retirement or planning for income at a later date. Most policies offer flexible payment streams and/or increasing income amounts.

How Does A Lifetime Annuity Account Work?

Lifetime annuity accounts are a variation of immediate accounts. Instead of making payments to the owner(s) for a fixed number of years, they pay for life. Plans can be established to cover one or two insureds and payments can begin at any age.

Lifetime payments will usually be lower than known, fixed-year policies.  This protects against longevity risk and assures contract owner(s) will not outlive their retirement savings. It is best to set up a lifetime annuity when interest rates are high.

What Is A Fixed-Period Annuity?

The best example of a fixed-period annuity would be a lottery payment. Those who are lucky enough to win the lottery and patient enough to take payments establish these types of policies. Lotto winnings usually pay-out over 26 years, for example.

Other accounts simply make payments for a set number of years. In most cases, payment cycles range from 5-30 years. The owner’s age does not affect the amount of the payments. If the owner passes before all payments have been made, the balance goes to his or her named beneficiaries.

It’s worth noting that some lifetime annuities also contain period certain terms. This guarantees all principal and interest is distributed to either the insured or their beneficiaries. This is a safeguard most lifetime annuity owners choose to assure maximum asset retention.

What Is A Deferred Annuity Account?

This type of contract allows owners to defer income for several years – even for life. This is done to maximize growth of the principal while deferring taxes until distributions begin.

Investors might use a deferred annuity as a way to save for a later date. When needed, interest and/or part of the principal can be withdrawn for living expenses or large purchases. Withdrawals are always available, but only taken sporadically and as needed. View the best fixed annuity rates for growth and deferral.

With deferred annuities, our clients usually take advantage of 1035 tax-free exchange rules to move from one policy to another. This allows them to lock-in the highest annuity interest rates once their existing account has matured.

What If I Want A Lump Sum Payment From My Policy?

A lump-sum option is usually available as well. The tax burden can increase with this type of withdrawal. Most often we see this method upon inheritance.

Owners can withdraw all of their principal and gains while living as well. This might be done to invest elsewhere or to pay for things like properties, vacations, tuition or healthcare expenses.

The fact is many annuity owners never withdraw their full principal or interest gains entirely. Those funds are not lost, however. The insurance company does not keep them. If the owner does not use them, then they go to the named beneficiaries — their families, for example.

Contact Us To Discuss Your Best Income Options

The bottom line is there are several ways to get paid from your annuity account. You can take systematic regular withdrawals – or sporadic payments as needed. And you can always defer your gains now to maximize future payments later.

It’s important to work with a independent brokerage specializing in annuities like ours. We’ll help you compare illustrations and policy provisions to find the most suitable accounts.

Category: Annuities