Provide Insurance Funding With Immediate Fixed Annuities
When used properly, immediate fixed annuities can be exceptionally effective financial planning tools. It is true that the reputation of this type of annuity is challenged vigorously by its opponents; however most of their arguments can be dispelled when this insurance contract is creatively planned with a clear understanding of its terms.
The purpose of the immediate annuity is to provide fixed income payments to the annuitant’s designated beneficiary for a planned time period. A required lump sum payment into the annuity is made by the annuitant to the insurance company prior to payment frequency, amount, and duration being established.
Designated beneficiaries are chosen by the account holders who most often name themselves or their spouse as such. Most opposition to fixed annuities revolves around their hefty penalties for early contract termination. A larger surrender charge is assessed to your account in the event that you require your invested funds earlier than the contracted payment schedule.
There has also been a great deal of press releases which challenge the product’s suitability. This attention has come from abusive or negligent practices in recent years that led to this product being oversold to people less likely to benefit from its unique design. Only by thoroughly understanding the purpose and the risks associated with this product can you accurately assess the potential benefit to your financial plans and goals.
Funding insurance premiums is a common use for immediate annuities. An annuity owner is able to setup a reliable source of income for a fixed period of time by investing the required lump-sum premium into an annuity with their chosen insurance company. This works well as insurance policy payments are typically scheduled at consistent and predictable rates. When well designed annuities can serve as excellent resources to manage long term insurance premium payments, especially those that continue for the duration of the individual’s lifetime.
Before implementing any financial plans for your future, thoughtful consideration and research should be done to ensure a strong understanding of how your chosen plan works for you. Several variables including tax consequences as well as fees can change the overall efficiency of your financial plan. If you have any degree of uncertainty about an annuity or any other financial product, consulting a professional will be well worth your while.
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