Annuity 101
If a person has a lot of money and decides not to spend it,
there are ways of making this grow. One option is keeping it in
the bank and letting it grow interest. The other is investing it
in the stock market with the help of a financial consultant.
This professional will be able to know what stock is worth
buying and when is the best time to sell.
Another way of making the money grow especially if the person
does not have medical insurance will be in the form of an
annuity.
An annuity is a deal made between the insurance firm and the
person. This arrangement allows the insurance company to invest
the money of an individual in various business ventures with a
percentage of growth to be returned in a number of years. This
money can also earn interest on it's own which will be given
back over a period of time.
The disadvantages of this deal may make the person wait longer
than expected to be able to get the money back due to surrender
periods. Rules set by the IRS may reduce how much the person can
get back due to taxes.
In the event of the untimely death of the individual, the
beneficiaries will also not be able to get the entire payment
because of tax deductions.
It is advisable for the person to pick a strong and stable
insurance company. If this money was invested in a firm that
suddenly goes bankrupt, the individual will not be able to get
anything.
To be sure that the insurance company is in good standing with
the industry, one should only go for a firm that has been given
a good rating from agencies such as Standard & Poors, Moody's
Investor Services, Duff & Phelps or AM Best.
Should the person still want to person an annuity, there are
some things that have to be decided upon to make it work. The
name of the person, the insurance company and who are the
beneficiaries in the event something happens.
Since a selling agent will probably be the one who will approach
the individual and present this proposition, the individual
should consult and be accompanied by the family attorney and a
financial consultant to make sure the deal is perfectly safe.
The person should be aware of the pro's and cons of an annuity.
When this is done, the individual should carefully read the
contents of the document before signing it.
The person should then be ready to make the first deposit in the
form of a check addressed to the insurance company. At the same
time, this document should be stored in a safe place together
with other papers that the person may need to bring out in the
future. Changes in the document may happen at any time which
makes it important to have this document stored in a safe place.
An annuity is something that people who are either rich or poor
can invest on. Since this works like an insurance plan, the
individual may choose to give the payment in one lump sum or do
it on a monthly basis.
Since it is probably not wise to invest the money in one place,
one should keep some money elsewhere that is easily accessible
in case of emergencies.