Everything You Should Know About Annuity Settlement Companies
Reaching your retirement age without anyone asking you about annuities is impossible. People want to know whether you bought one or work for an insurance agency, or they are likely to try to sell annuities to you for a lifetime income. In such cases, structured settlement companies come to your rescue.
Before that, it’s crucial to understand annuities. These are insurance policies that are more like investments.
Annuities offer a hedge against the risk of losing your income. For instance – a huge loss in the stock market or when your shares collapse. So, instead of personally managing your money in the form of stocks and mutual funds, it’s better to buy an annuity that guarantees you a steady income for a lifetime. Such an act is possible with the help of annuity settlement companies.
To be precise, annuities are contracts between insurers and investors. Under this process, you can invest money through a series of payments or a lump sum. In addition, the insurer agrees to make periodic payments to the investors in exchange for investment. Just like a life insurance policy that guarantees a lump-sum payment to your heirs, an annuity contract with an annuity settlement company will be beneficial as they will pay you.
History of Annuities
It dates back to ancient Rome, but the record of the first annuities was in America during the colonial period. Then, in 1759, an organization was formed to provide a secure retirement for aging ministers and their families. The era of annuity began in 1952 for the educator’s retirement fund. Today, annuities offer a good plan for individual retirement, i.e., on a tax-deferred basis.
Structured Settlements and Annuities
Structured settlements are linked to annuities because they effectively deliver income to the needy. This process aims to replace lump-sum payments awarded to personal injury claimants within a month. Annuities are designed to offer timed payouts, investment gains, and guarantees on the principle that the insurance organizations were already offering. As a result, it quickly became a preferred option for implementing structured settlements. To encourage this, new laws were made on capital gains and interest on the annuity for tax-free structured settlements.
Pros and Cons of Annuities
The primary reason for owning annuities is security. To ensure a continued income stream during retirement, various annuities are guaranteed a minimum rate of return. It means not only will the principal be protected against the risk of loss, but the income will be pretty good. Thus, the owner of an annuity receives a life-long stream of income that’s more than the original investment.
The best part is that annuities offer predictability. Fixed annuities are tied to investors who are curious about income generation in the future. They generally provide superior rates to money market accounts or CDs, i.e., certificates of deposits. Plus, they come with built-in protections and guarantees.
Variable annuities are tied to unwavering interest rates. These are attractive to investors who know how much money will be generated in the coming years. In addition, they offer great flexibility, protection against losses, and certain tax benefits.
The other part of the story is that annuities have very high fees. For example, a broker who sells an annuity plan to you receives a commission, and the annuity settlement organizations take annuity charges as per the annuity maintenance fees.
So, what are you waiting for? Contact the companies that buy structured settlements and make the right move!
