{"id":3939,"date":"2021-10-25T08:00:58","date_gmt":"2021-10-25T06:00:58","guid":{"rendered":"http:\/\/contattoblogs.timslatter.co.za\/?p=3939"},"modified":"2021-10-25T08:00:58","modified_gmt":"2021-10-25T06:00:58","slug":"whats-an-annuity","status":"publish","type":"post","link":"https:\/\/contattolive.co.za\/north\/whats-an-annuity\/","title":{"rendered":"What\u2019s an annuity?"},"content":{"rendered":"<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Have you ever heard someone say that you need to make your money work for you? It seems like an impossible achievement for many of us because we immediately think we need a stack of dollar bills to leverage this strategy.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">And, that\u2019s not entirely incorrect. We do need a large sum invested, but we don\u2019t necessarily need it all at once, and it\u2019s certainly achievable with a long term plan.<\/span><\/p>\n<p style=\"text-align: justify;\"><b>Here\u2019s a quick overview:<\/b><\/p>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Annuities are financial products that offer a guaranteed income stream (used primarily to fund retirement)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Annuities exist first in an accumulation phase; this is when we fund the product with either a lump-sum or periodic payments (which is why we don\u2019t necessarily need all the money upfront)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Once the annuitization phase has been reached, the product begins paying out to the annuitant for either a fixed period or for the annuitant&#8217;s remaining lifetime.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Annuities can be structured into different kinds of instruments. These are commonly defined as fixed, variable, immediate, and deferred income, which gives investors flexibility.<\/span><\/li>\n<\/ul>\n<p style=\"text-align: justify;\"><b>Let\u2019s dive a little deeper&#8230;<\/b><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Annuities are contracts sold by financial institutions where the funds are invested to pay out a fixed income stream later on. They are mainly used for retirement purposes and help individuals address the risk of outliving their savings. Upon annuitization, the holding institution will issue a stream of payments at a later point in time.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Annuities are appropriate financial products for individuals seeking stable, guaranteed income. Because the lump sum put into the annuity is illiquid and subject to withdrawal penalties, it is not recommended for short term savings or for those with liquidity needs to use this financial product.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">A big benefit of well-structured annuities is that holders cannot outlive their income stream, which hedges longevity risk. So long as the investor understands that they are trading a liquid lump sum for a guaranteed series of cash flows, the product is appropriate. Some people hope to cash out an annuity in the future at a profit, however, this is not the intended use of the product.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Immediate annuities are often purchased by people of any age who have received a large lump sum of money and who prefer to exchange it for cash flows into the future. The lottery winner\u2019s curse is the fact that many lottery winners who take the lump sum windfall often spend all of that money in a relatively short period.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Annuities can be structured generally as either fixed or variable.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Fixed annuities provide regular periodic payments to the holder (also called the annuitant) and are often used in retirement planning. Variable annuities allow the owner to receive larger future payments if investments of the annuity fund do well and smaller payments if its investments do poorly. This provides for less stable cash flow than a fixed annuity but allows the annuitant to reap the benefits of strong returns from their fund&#8217;s investments.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">It\u2019s important to note that annuities are not a sure thing &#8211; nothing is! But, inside of a well-built financial portfolio, annuities are helpful products to ensure income at a later stage in life.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Have you ever heard someone say that you need to make your money work for you? It seems like an impossible achievement for many of us because we immediately think we need a stack of dollar bills to leverage this strategy. And, that\u2019s not entirely incorrect. We do need a large sum invested, but we don\u2019t necessarily need it all at once, and it\u2019s certainly achievable with a long term plan. Here\u2019s a quick overview: Annuities [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":3940,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12,27],"tags":[],"class_list":["post-3939","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","category-market"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>What\u2019s an annuity? - Contatto North<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/contattolive.co.za\/north\/whats-an-annuity\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What\u2019s an annuity? - Contatto North\" \/>\n<meta property=\"og:description\" content=\"Have you ever heard someone say that you need to make your money work for you? It seems like an impossible achievement for many of us because we immediately think we need a stack of dollar bills to leverage this strategy. And, that\u2019s not entirely incorrect. We do need a large sum invested, but we don\u2019t necessarily need it all at once, and it\u2019s certainly achievable with a long term plan. 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