The Steps to Investing in an Annuity

The investment landscape is filled with choices. But if you’re looking to protect your principal while benefiting from tax-deferred growth, annuities are the answer.

With that being said, it’s important to invest in annuities the right way. Follow these steps for maximum return on your investment.

Decide on Your Goals for Retirement
Before you go about investing in annuities (or in anything else, for that matter), you need to have a clear financial plan. The right investment strategy can make the difference between a comfortable retirement and a retirement full of financial stress.

In a nutshell, you need to decide how much income you need once your working years are over. When you have a rough idea of what you’ll need each month, you and a financial advisor will have a clearer picture of what you need (and don’t need) in an annuity.

Determine Your Liquidity Needs
Most annuities offer some level of liquidity, but some offer more than others. Most annuities let you take out between 5% and 15% of the fund’s total value each year. The most common figure is 10%. If you become severely ill and need additional money, most annuities will let you withdraw more.

Different people have different liquidity needs. Before you invest, determine what yours are. And of course, you’ll need to understand the terms of any annuity beforehand. Grasping the ins and outs of a given annuity can be tough, but the right financial advisor can help you do it.

Learn About Different Types of Annuities
Every investment type has its upsides and downsides. The same goes for different types of annuities. Before you choose one to invest in, you should know at least a bit about the four main types:

● Immediate Annuities: Best for steady payouts during retirement
● Fixed Annuities: The lowest risk option, as they have a guaranteed rate of return
● Deferred Annuities: Best for anyone who wants to defer taxes
● Variable Annuities: Higher-risk, but can potentially give you the greatest returns

You also should consider your goals. For instance, if you want guaranteed retirement income, immediate annuities are ideal. If you have a higher risk tolerance and want to try to get a greater return, you might want to try variable annuities.

Decide How You’ll Fund the Annuity
Once you’ve selected an annuity to invest in, you need to decide how you want to actually get your money into the fund. These are some of your main options:

● Cash: You can use money in your bank account to directly fund an annuity
● Rollovers: If you wish, you can roll current investments (like stocks, bonds, etc.) into your annuity
● Ongoing Contributions: Putting a portion of each paycheck into an annuity is a great way to expand your investment over time
● Retirement Accounts: You also can take funds out of a 401(k) or other retirement account and put them into an annuity

Complex financial situations may make it hard to decide what funding strategy you need. A financial advisor will be able to help you choose the best funding strategy for building wealth. After all, having a range of investment types is critical for building durable wealth.

A Professional Financial Advisor Will Help You Make the Right Investment Moves
Plenty of people miss out on investment opportunities simply because of a lack of knowledge. Don’t be one of them! The right financial advisor will take a complete inventory of your finances and help you select the right annuities.

For more information, visit:


Follow Us

Subscribe to Our Newsletter

What's Next, Updates & Editorial Picks In Your Inbox

© 2017-2021 Advisors Magazine. All Rights Reserved.Design & Development by The Web Empire