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Annuity plans are a low-risk method to invest your money and guarantee a fixed income throughout the investment period. Besides regular monthly payments, annuity plans also offer tax benefits and optional death benefits. These plans are an excellent option if you want to supplement your retirement savings.
The plans offer safety and long-term growth. While these plans do not offer liquidity or fast income growth, investors do not have to worry about financial losses. Several reputed insurance companies and financial service providers specialize in offering reliable annuity plans to users. However, there are some financial factors you need to keep in mind before selecting the best fixed annuity plan.
Analyze Your Investment Goals
You may note that annuity plans are not a “quick-growth” investment option. If your investment goal is to make huge profits in a short period, then annuity plans may be the wrong choice for you. These plans are designed to secure your future. The investor invests a lump sum amount and gains steady returns on this amount.
Unlike equity investments, they don’t promise high returns or contain high risks. Therefore, it’s vital to evaluate your investment goals to know if annuity plans are the right choice for you. The plans help add security and stability to your investment portfolio.
Compare the Payout
The annual payout is the annual return percentage the plan offers. The payout will differ based on the amount you invest. Therefore, you may consider comparing payouts of plans in the same investment band. For example, suppose $10,000 to $15,000 is one investment range.
You may compare the payout offered by plans within this band and choose the plan that offers the best payout. Plans worth $10,000 will most likely have a lower payout than plans worth $15,000. Hence, you may also want to compare the profitability aspect and determine which plan offers more value for money.
The payout may also vary based on your age, marital status, and gender. You may also consider classifying the plans as joint life plans, single man life plans, and single woman life plans and then compare different plans of the same status. Additionally, you may also want to compare when the payout begins.
Ratings of the Plan and Reputation of the Company
Credit rating agencies and other financial-rating experts rate insurance plans and annuity plans based on several factors. Choosing the best fixed annuity plan offered by a trusted financial service provider will help minimize risks. You may study the credit ratings offered by reputed corporations like AM best. A++ is the highest rating a fixed annuity plan can have.
It’s critical to choose a plan that has at least an “A” rating. The credit rating company studies different qualitative and quantitative aspects of the plans. “Financial strength” of the company is a crucial aspect that most credit rating companies consider.
Cost of the Plan
The cost of the plan is the initial investment an investor makes to buy the annuity plan. The initial cost of the annuity plan may be as low as $10,000 or as high (or higher) than $200,000. Investors may also analyze the “opportunity cost” of the plan.
You may choose a plan that offers a higher payout than the standard bank FD rate in your state. You may also compare the cost of the annuity plan with the cost of other similar fixed investment options. Financial experts assert that the opportunity cost is a more important consideration than the financial cost of the plan.
Wrap Up
Fixed annuity plans are ideal for supplementing retirement income. The best-fixed annuity plan aligns with your living cost, income requirements, and investment objectives. You may go through reviews in review websites to get a comprehensive idea of different annuity plans you may choose after analyzing their pros and cons.
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