With the introduction of new investment strategies and products, navigating the investment world has become challenging for most people.

Be it long or short-term mutual funds, age-based target funds, structured products, or market-weighted ETFs, there’s no shortage of innovation in the financial industry. Still, investors choose to invest in annuities; ever wondered why?

One reason contributing to the soaring popularity of annuities is that they help retired individuals protect their retirement savings, ensuring a steady source of income.

As per MoneyWeek, the average yearly annuity income has increased by £700 in the last year.

But, has all the negative buzz around annuities made you skeptical if you should buy an annuity? Well, then give this guide a read, as it discusses four reasons why annuities are popular among investors. By the end of the guide, we are sure you’ll be able to decide if annuities will be beneficial for you or not.

Let’s get straight to the deets, then.

What Is An Annuity?

An annuity is a type of insurance agreement that is published and distributed by banking or financial institutions to pay out deposited money in the form of a fixed income stream later on.

Contrary to popular belief, annuities aren’t investments, even though they are marketed as one. Investors purchase annuities or invest in them either with lump-sum payments or monthly payments.

Annuities are of different types, each offering different benefits and designed to achieve certain goals.

Some are intended to assist individuals in saving funds for the retirement period while offering them the option to convert those investments into a fixed stream income. On the other hand, several types of annuities are designed to help people who require retirement income now or in the upcoming years.

4 Reasons People Buy An Annuity

Now that you know what an annuity is, let’s explore four reasons annuities are a much sought-after investment option among people.

1. Guaranteed And Predictable Income For Life

Will annuity rates go up or not is a question that has held some individuals back from purchasing an annuity. However, many make an annuity purchase because it promises a continuous flow of retirement income for life.

Because of this guaranteed source of income, individuals can maintain their standard of living without difficulties.

To help people take control over their finances, annuity experts like Bryan Anderson of the Annuity Straight Talk are revealing strategies that can place them in the best financial position. These helpful videos can help individuals protect their finances, generate income and increase their net worth.

You will also find an updated checklist added to the free Index Annuity Strategy Series that can ensure people don’t commit any mistakes when purchasing an annuity. You can also find such podcasts available on YouTube, Spotify, Apple Music, and Google Play Music, so it’s accessible to all.

2. Tax-Deferred Growth

Where earnings from the majority of investment products are taxable, annuities provide tax-deferred growth. What that means is individuals don’t have to pay taxes on the accumulated funds until they withdraw them.

Bear in mind that an annuity doesn’t offer extra tax deferral for IRAs or other qualified assets. Furthermore, they may aid in the management of capital gains tax repercussions, though this largely depends on the type of annuity chosen.

3. Prevent Outliving Assets

Because of improvements in standards of living and healthcare, individuals in today’s times are living longer than people did in the past. That means more money will be needed to survive the golden years.

In those times, it’s highly possible that a retirement investment portfolio may fall short of funds, especially if deposited money is drawn from it annually.

Compared to pensions and Social Security programs, an annuity offers individuals funds that last a lifetime. In other words, annuities can help mitigate the difficulty of stretching income across life expectancy.

4. Death Benefit Protection

Not many know that with annuities come death benefit protection. That means the remaining payments are made to the survivors of the deceased if they die prior to their annuity pays out.

However, to a large extent, this depends on the terms of the annuity contract. Individuals can specify the minimum amounts of payments to be passed out to their beneficiaries in their contracts.

Funds may be distributed either as a stream of payments or a flat sum. Either way, the financial needs of the family are taken care of even after the death of the breadwinner.

Purchasing An Annuity: Takeaway

Taking everything into consideration, we conclude that purchasing or investing in an annuity would be beneficial for those with no predictable stream of income in the future. That’s because it promises a steady flow of funds during retirement.

However, you won’t benefit much from an annuity if you have sufficient retirement assets and Social Security funds.

When purchasing an annuity, remember not to put all your eggs in one basket. Leave aside enough non-annuity money to meet certain living expenses and unanticipated bills. In case of doubts, consulting a financial expert will be the best bet.

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