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Retirement can be a confusing time for many people. You have to start planning for it when you have little experience and money. When you have experience and money, there isn’t enough time to start late.
Annuities are an insurance product that helps to supplement your retirement savings. It’s something that an investor will pay into monthly, similar to insurance premiums for a car or other asset. Once the time is up on the annuity, you can start getting monthly payments.
These payments are in essence a replacement for the pensions that many companies used to pay out before 401(k)s and Roth IRAs became popular.
But what is a variable annuity, and is there any kind of variable annuity advice you can easily find? Keep reading for your variable annuity guide!
How a Variable Annuity Is Different
With any investment product, there are eventually variations on the normal product that pops up. Annuities are no different.
Variable annuities are similar to normal annuities, but with a very important difference — the value of the annuity depends on the value of its underlying portfolio.
What If You Bought One and Don’t Want It?
From time to time we make financial mistakes, or we buy products that no longer serve our needs. You also might need to stop payments and get some money back fast. If this happened to you and you only want to get your money back before it’s too late, you have an option.
Using a company like Right Way Funding, if your variable annuity isn’t working for you as well as you like you can transfer the ownership to them. Similar to changing a beneficiary, the annuity will mature and become ready to pull money from. Instead of going to you, it will go to a company that now owns the rights to the annuity.
You won’t have to pay once it’s transferred and the company you transfer to will give you a lump sum in return. The sum is usually not as large as what the product would have paid out, which is how the companies continue to make money.
With a variable annuity, though, there’s always a chance that a downturn in value is an indicator of more major issues in the future. Better to get out while you still can, in some cases. These companies help you to save money and make some back in the process.
In return, they take the risk that the annuity will lose value, but also the reward if it ends up performing better in the future.
Is There a Better Solution?
Saving for retirement and preparing for retirement are very different things. What are the options you have?
- Fixed-rate annuity
- Variable annuity
- 401(k)
- Roth IRA
- HSA
- Employee Stock Ownership Program (ESOP)
- Mutual funds
- ETFs
- Cryptocurrencies
- Decentralized Finance
A fixed-rate annuity is very much like a savings account. It’s made up of products that are fixed-rate, and so the annuity has a predictable fixed rate of return.
A variable annuity isn’t as stable but does give the opportunity of greater rewards upon maturation.
Roth IRAs are a great way to save for retirement, with untaxed withdrawals — but there’s a catch. You can only contribute up to $140,000 as a single person or $208,000 as a married couple.
401(k)s have their own drawback as well. The withdrawals are taxed, and you can only contribute a certain amount per month. You can make “catch-up” payments as you age, though.
Mutual funds and ETFs are direct market investment products, instead of products built on top of them like annuities. This exposes you to more risk, but more reward and control.
Retirement Plans and You
Retirement plans are hard to wrap your brain around, but it’s an important part of life we should plan for as soon as possible. Not sure about each product’s offering, or when you can get started?
Keep reading our article for the latest news and information to keep you ahead of life!
