This is a guest post from Annuity.com.
When you are looking for an annuity to sign up for in order to provide yourself with the funds that you need in order to retire, it is important to ensure that you are getting the best annuity rates that you can from a reliable insurance company where your funds will be kept safe. Whenever you are planning for your future funds, it is always a good idea to get in touch with a financial advisor that you feel you can trust. This can be one of the most important parts of the process, since they have a more intimate knowledge of the industry and can find the best deal for you.
Even so, finding the right annuity to invest in can be a difficult thing to do. The reason for this is that there are not only so many different rates to choose from, but there are so many different types of annuities available. The industry has become considerably more innovative with its financial products in recent years, and this can make it difficult to decide which type of annuity is right for your needs. This is why it can be so helpful to have an expert on your side when you are trying to navigate through all of the available options.
There are several factors that need to be considered. The first is the type of annuity that you are signing up for. There are fixed annuities, variable annuities, and indexed annuities. These three different types of annuities offer very different benefits, and many of them have their own specific riders that can be added on and so forth.
Types of Annuities
Just because an annuity is fixed, this does not necessarily mean that the interest rate never changes. What it does mean, however, is that the way that the interest rate will change in the future is predetermined by the contract. The interest rate will not change as a result of the behavior of the economy. This can be especially beneficial for people who want to protect their funds from losses that could occur when the market takes a downturn.
Variable annuities are somewhat different. In this case, the funds are invested in a mutual fund, and possibly other financial organizations. Unlike the other two types of annuities, upfront and annual fees may be charged on the variable annuity. In addition to this, the interest earned by the annuity is determined by the performance of the investments. This means that if the market performs poorly, the annuity may as well. Even so, at least the original investment is guaranteed back.
Indexed annuities are a newer option that is based on the performance of financial indicators such as the S&P 500. The interest rate is determined based on the behavior of this financial indicator. This is somewhat similar to a variable annuity. However, indexed annuities often come with a guaranteed minimum interest rate.
Choosing the Best Option
Fixed annuities are the best option for people looking for a safe investment that will earn a guaranteed amount, allowing the most straightforward financial plans to be made. Indexed annuities offer a slightly more risky investment that could offer higher yields, but that is still guaranteed to earn interest. Variable annuities may offer the highest possible returns, but are also likely to earn less interest in the long run.
Additional riders are also important to consider. If you want benefits to be passed on, you may want to set up a joint annuity or an annuity guaranteed to pay out for a given number of years.