Most people think of annuities as investment vehicles that they can add to their portfolio, when in actuality they are insurance contracts. If you decide that you would like to purchase an annuity Sarasota brokers and financial planners can provide some aid. You should try and understand the particulars of an annuity before agreeing to sign a contract or remitting any payments.
It is first important that an investor understands that this addition to his portfolio will actually be an insurance contract and not an investment. He is setting aside a portion of his current income in order to guarantee that he has at least some income during his retirement phase. To do this, he make current payments to the insurance company and they agree to pay him a lump sum or periodic payments at a future time.
Most investments earn a return that is taxable as capital gains, which is generally lower than most people will pay in ordinary income taxes. It is therefore necessary to note that any gains that an annuity produces are taxable as ordinary income. These taxes do not have to be paid until the owner begins to receive his payments during retirement.
You can choose from three different types of annuities that are available. If you choose a fixed one, then you will receive equal, periodic payments of a set amount starting at some date in the future. This date is generally determined at the time the contract is signed. If you elect to buy an indexed version, then the return and the payments are based upon one of the major market indexes. Finally, if you choose a variable annuity, which carries the most risk, your payments and the return will be based upon fluctuating interest rates.
Benefits to buying an annuity include the assurance that the person has at least a limited amount of income during his retirement. This helps to offset the risk of loss that his other investment vehicles may carry. If he fails to live long enough to receive any or all of the agreed upon payments, then one of his family members should receive the death benefit.
There are also disadvantages in choosing to purchase such a contract. The growth opportunities are very limited and may not produce the earnings that an individual wishes to achieve. Those earnings also stand the chance of being taxed at a much higher rate than other investments. Many annuities also have fees associated with their management and can carry a hefty penalty charge for early withdrawals.
Prior to making the decision to sign on the dotted line, a person should talk to a financial professional that is not associated with the insurance company. The broker is a salesman that is looking to sell as many contracts as he can. A fee-based financial planner will usually offer the best and most personalized advice.
If a person wishes to buy an annuity Sarasota financial planners should be consulted first. They can help in fully understanding the benefits and disadvantages, which is very important. This type of insurance vehicle can effect an individual's portfolio and future tax payments. He needs to fully comprehend both of these aspects.
It is first important that an investor understands that this addition to his portfolio will actually be an insurance contract and not an investment. He is setting aside a portion of his current income in order to guarantee that he has at least some income during his retirement phase. To do this, he make current payments to the insurance company and they agree to pay him a lump sum or periodic payments at a future time.
Most investments earn a return that is taxable as capital gains, which is generally lower than most people will pay in ordinary income taxes. It is therefore necessary to note that any gains that an annuity produces are taxable as ordinary income. These taxes do not have to be paid until the owner begins to receive his payments during retirement.
You can choose from three different types of annuities that are available. If you choose a fixed one, then you will receive equal, periodic payments of a set amount starting at some date in the future. This date is generally determined at the time the contract is signed. If you elect to buy an indexed version, then the return and the payments are based upon one of the major market indexes. Finally, if you choose a variable annuity, which carries the most risk, your payments and the return will be based upon fluctuating interest rates.
Benefits to buying an annuity include the assurance that the person has at least a limited amount of income during his retirement. This helps to offset the risk of loss that his other investment vehicles may carry. If he fails to live long enough to receive any or all of the agreed upon payments, then one of his family members should receive the death benefit.
There are also disadvantages in choosing to purchase such a contract. The growth opportunities are very limited and may not produce the earnings that an individual wishes to achieve. Those earnings also stand the chance of being taxed at a much higher rate than other investments. Many annuities also have fees associated with their management and can carry a hefty penalty charge for early withdrawals.
Prior to making the decision to sign on the dotted line, a person should talk to a financial professional that is not associated with the insurance company. The broker is a salesman that is looking to sell as many contracts as he can. A fee-based financial planner will usually offer the best and most personalized advice.
If a person wishes to buy an annuity Sarasota financial planners should be consulted first. They can help in fully understanding the benefits and disadvantages, which is very important. This type of insurance vehicle can effect an individual's portfolio and future tax payments. He needs to fully comprehend both of these aspects.
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