Annuities and Colorado annuity rates
Annuities can be a great addition to your financial plan. Similar to insurance, annuities allow you to pay a monthly payment to a financial institution or insurance company, with the payment determined by how long you pay and the amount you wish to receive upon maturity.
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Annuities are used to create a retirement income flow by making regular payments over a period of years when you are actively employed. There are generally two types of annuities: fixed and variable.
Fixed Annuities
In a fixed annuity, the insurance company or financial institution gurantees you will earn a minimum interest rate as your investment ages. They also guarantee your payments will be a guaranteed amount for each dollar in your account. The payments can be for a fixed period of time or an indefinite period, such as your lifetime. Fixed annuities are not securities are therefore are not regulated by the SEC. Fixed annuities are generally invested in lower interest bearing government bonds.
Variable Annuities
Variable annuities allow you to invest your payments in different investment options such as mutual funds. The interest rate your receive on your investment and also the retirement payments will depend on the performance of the underlying investment. Variable annuities are regulated by the SEC.
There are other types of annuities such as equity-indexed annuities that are a hybrid combination of fixed and variable annuities.
Is an annuity right for you?
Annuities are an excellent investment for people who believe they will outlive their retirement savings. Annuities guarantee a steady income for the rest of your life. The amount of the income payments are determined by how much you invest in your plan throughout your working years.
Income from annuities is tax-deferred until you begin making withdrawals from your account. Withdrawals before the age of 59 1/2 could be subject to surrender fees, a 10% federal tax penalty and also income tax.
When investing in an annuity, buy from reputable companies that maintain a solid financial rating.
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