Wall Street Journal – How Well Do You Know… Fixed Annuities?
Following are excerpts from a Wall Street Journal article titled, “How Well Do You Know… Fixed Annuities?” by Leslie Scism. In the article, AnnuityAdvantage.com is referenced as a resource for current annuity rates.
Back before 2008’s cruel lessons about the stock market, many individual investors saw little reason to bone up on boring subjects like fixed-income investments and annuities. And what was less attention-grabbing than the combination of those two topics, the fixed annuity?
Nowadays, boring is better to many investors burned in stock mutual funds.
An annuity is a tax-advantaged retirement-income product. The type of annuity that gives you an immediate stream of payments, typically lasting for your lifetime, is known as an “immediate,” “income” or “payout” annuity. “Deferred” annuities, on the other hand, begin with an accumulation phase and give you the right to turn your money into a stream of periodic payments in the future.
Studies, some sponsored by insurers, say immediate annuities are the best product for removing the risk of outliving your savings. The size of an immediate-annuity purchase should take into account facts such as your total accumulated wealth and whether you have an old-fashioned pension plan.
Many advisers recommend annuitizing enough of your savings to cover 100% of basic living expenses. This gives you the freedom to take more risk with your other investments.
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