What is an Annuity ? and does it make sence to buy one at 35?

Answer 1

An annuity is a type of investment where you agree to give the investment company a set amount of money, and they agree to pay you a set amount of money back, usually monthly, for a set length of time, or for the rest of your life.

The investment company hopefully makes money because they have the use of your cash while you are paying into the fund. You will have an income source that you can never outlive, assuming that the investment company doesn't go under. You are betting that you will live longer than average, and get more back from them than you put in. They are betting that you won't, but have stacked the deck so that, on average, they will still make some money in most cases.

Answer 2

Yes, it makes a great deal of sense to buy this at age 35. Only if this is money you will Not Need until after age 59 1/2. Money Accumulates Tax Deferred indefinitely. You only pay income taxes when you make withdrawals and only on the amount you withdraw. Tax treatment is very similar to an IRA, except that deposits are not tax deductible, it has NO Required minimum distribution and there is No Limit to the amount you can contribute. If you want to put $10,000,000 into to Annuities, you can do this.

At your age, an Index Annuity would be more Appropriate. The interest you earn each year would be based on a portion of the Upside movements in Stock Market Indexes with No Risk of Loss.


What is an Annuity:

An Annuity is a Savings Instrument issued by Insurance Company.

No Other Type of Company can Issue an Annuity.

You can only Buy an Annuity from a Licensed Insurance Agent or a Business Entity that is Licensed as an Insurance Agent. The person you speak to at this company MUST also be a Licensed Insurance Agent.

These Annuities Often have No Fees, Initial Charges or Annual Fees, 100% of your money earns interest.

Types of Annuities:

Immediate / Income Annuity: This Pay's you Guaranteed Monthly Income for life or for a period of time. Payments must begin within 12 Months of your Purchase, usually payments begin in 30 days.

Fixed Rate Deferred Annuity: This is a Savings Instrument and Accumulates your money Tax Deferred at a rate of interest that is guaranteed for the term selected or just 1 year. Different Variations on this.

Index Annuity - Same as the Fixed Rate Deferred Annuity Except that the interest you earn each year would be based on a portion of the Upside movements in Stock Market Indexes with No Risk of Loss.

Look to this website for all your information on Annuities: http://www.jdsannuities.com/index_annuities

Do Not get the above mixed up with Variable Annuities. Variable Annuities are Securities Products and are basically mutual funds wrapped into a deferred annuity. Annual Asset fees totaling 2.00% to 3.00% are very common. The Investment Risk is all Yours. These Variable Annuities are the Annuities that you may often hear called Expensive.

Answer 3

Any investment has its pros and cons. The pro of an annuity is that you invest a certain amount of money and the insurance company agrees to pay you a sum of money each year for the rest of your life expectancy. If you outlive their "guess", you win because you keep receiving that payment longer than they expected. Buy an annuity for an amount you would like to keep constant. This will be your safe investments because you are guaranteed that yearly payment. Then invest another amount of money in mutual funds, stocks, 401(k), etc. Invest more aggressively with that money and you will be diversified.
The con is that sometimes the fees can be higher than mutual funds because the insurance company needs to manage the funds (annuities are made up of several different mutual funds - some have guaranteed returns, some have managed accounts, some are variable, some are fixed, etc, etc, etc).
It's always best to consult with a financial planner (CFP, ChFC) if you are unclear about any of this. They will help you decipher all of this information.

Ron, ChFC

Answer 4

I suspect you are looking at a tax-deferred variable annuity. They aren't perfect, but they do offer some advantages.

Most of the benefits center around guaranteeing your principal and/or income. At 35, you've got plenty of time to recover if/when the market corrects and won't touch this money for 25 years anyway (that's a long time to be paying for the protection).

I'd say that you probably aren't an ideal candidate for an annuity. I'd most likely recommend that you buy a good tax-effecient mutual fund instead.

Answer 5

Annuities are usually low return investment vehicles. You're basically paying someone to give you an allotment. I would suggest seeing an investment professional, who can advise you in establishing a diverse investment portfolio

Answer 6

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