Annuities

When it comes to annuities, you should definitely consider them for your retirement. However, a downside of having annuities is that the money you will spend on buying them will be gone until your heirs can have it. Even so, in exchange for that, you have to option to receive a regular income for the rest of your life.

It’s usually best to concentrate on fixed annuities, which might start paying you right away or on a deferred basis, at a certain point in the future that you have to specify. At the same time, you will avoid all those variable annuities and index annuities, especially since they tend to have more restrictive terms.

If you want to understand better what a deferred annuity can offer, remember that, until recently, a 65-year-old man would have been recently able to spend around $100,000 for a certain annuity that would start giving him money in 10 years, offering around $1,138 per month.

Deferred annuities are great if you’re worried that you’ll run out of money later in life. Besides, there’s something else you need to consider: when interest rates are higher, annuity contracts have bigger payouts. For the moment, we’re in a low-interest rate environment. That’s why you have to think about a “laddering” strategy, so you can spend only a bit of the total amount you might want to spend on annuities.