Annuities are complex financial instruments today that are a mixture of insurance and investment. Since private pension funds have all but disappeared in the US, many consumers have turned to annuities to protect themselves in old age.
“Annuities fill a void for people who are less risk averse,” says Derek Delaney, a registered investment advisor and certified financial planner in Minnesota who runs PharmD Financial Planning LLC.
This product is for people who want to increase their retirement income, maintain their principal and diversify their investment portfolio. Annuities are perfectly adaptable. For example, an insurance company customer can add a clause that will guarantee a lifetime income with inflation protection.
Once you invest in an annuity, the return you receive from it can be distributed monthly, quarterly, yearly, or lump sum. The payment amount is determined by factors such as interest rates, your age, life expectancy, and the duration of the payment period.
Depending on your needs, you can set up an annuity for immediate or deferred payments.
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