Annuities are an investiture option that permit a person to collect tax deferred payments for a certain amount of time. Just as there are good and bad points with any investitures, the annuities pros and cons are certainly something to be looked into before you make, what can potentially be, a very large purchase. More and more people are living into their 80′s and that could mean spending nearly a third of their lives in the retirement phase.
Being aware of the good and bad points of annuities is important.
When you retire, the tax deferred payments from your annuity are simply another alternative after you have invested up to your limit within your 401K, Roth and Traditional Individual Retirement Accounts. It is the possibility of a good level of income from an annuity that are attractive by virtue of the fact that they are also tax deferred. Even So, one of the cons of purchasing an annuity, that should be considered is that the fees can actually cancel out the tax benefits. Some of the expense comes from early ‘surrender fees’ and from the administration of the fund so you need to be aware of both.
It does not take long for these fees to mount up.
Without doubt this is an important aspect about your decision for the type of annuity you take out.
If you have a home loan you can take out ‘borrowed’ tax free payments when you take out a ‘reverse annuity mortgage’. For seniors who wish to carry on enjoying their lives as they did previously, this alternative within an annuity can be very worthwhile. Personal and medical costs can always arise and this facility will provide low income seniors with a tax free fiscal aid and stability for the rest of their lives.
All The Same, a con to be mindful of is that upon an annuity holders death, the lending agency will get total control of the real estate in a reverse annuity mortgage situation. Banks do have very strict rules for anyone applying for the reverse annuity mortgage. As there are so many stipulations, specially when the policy holder of a reverse annuity mortgage dies, it is important they carefully study the small print in detail.
As always, expert financial help is available, so if you want to know the ‘good and bad points’ of annuities, and if they are right for you, get in touch with a reputable financial adviser. Your individual needs must addressed plus the pros and cons need to be explained in layman’s terms, which is something only a financial planning professional is capable of doing.
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