How To Make Sure That You Get The Best Life Annuity Rates
Life annuity rates can vary from product to product, depending on the exact terms of the annuity. Which product is right for you will depend on exactly what you are hoping to achieve from your life annuity investment, and for how long you intend to keep the annuity going. Annuities are excellent investments for preparing a retirement fund, because they effectively combine insurance and investment. No-one can be sure how many years they will live for after they are retired, and investing through an annuity can take away a lot of the uncertainty.
The insurance company offering the annuity effectively takes on the risk of how long you might live for. It is easy for them to do this, as they can just use statistics and probability to pool that risk across large numbers of people. While the individual may not know whether they are going to live to be sixty-five or ninety-five, the insurance company will know that the risks will even out across large numbers of people.
The great benefit of annuities for the person planning their retirement is that they allow money to accumulate tax free. Tax will still be paid on the returns when they are drawn out during retirement, but while they are accumulating they will be tax free. This may not seem as though it will make a great difference on the small sums of money involved in annuity contribution, but the power of compound interest can turn small sums into surprisingly large ones over time.
The main variables involved are the rate at which you put money into the annuity, and for how long you do so. There are calculators available which will allow you to work out exactly what each level of contribution will return to you in time. Use these calculators to work out what you will need to contribute, based on your estimated needs during your retirement. Work this out with several competing products to make sure you get the best life annuity rates.
Make sure that every factor which can affect and influence the outcome of your investment is considered. There are tax issues which can have a very severe effect if you intend to leave any of your investments to your heirs and benefactors. While money is allowed to accumulate tax free during the growth stages of an annuity, everything will work in your favor. Provided you intend to use the money yourself during your retirement, there will not be a problem. If, on the other hand, you intend to leave your money to your children, you would be better off choosing a life assurance product which will have many similar features to an annuity. You will not, however, benefit from the same returns as life annuity rates.
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