If you are looking for a way to guarantee that you are going to have an income for the rest of your life, an annuity is the way to go. However, they aren't as cut and dried as you might think. They are quite complex and cost a fair amount of money to purchase. Annuities allow you to take your focus for the future and invest it into something that is going to give back to you. In purchasing annuities, don't make one of these costly mistakes.
Not choosing the right type of payout.
For those who are looking to buy annuities immediately, you can maximize your annual payouts with a single-life annuity. This one won't pay your surviving spouse in the event of your passing, so this is something you want to take into consideration before going this route. If your spouse needs that money to survive, you should choose the annuity that pays a little less per year in the here and now, but extends to your spouse until their passing.
Not choosing the right payout guarantee.
While many people opt for immediate annuities, you might be better off with a deferred variable annuity that offers you a payout guarantee. You can invest your money into a mutual fund account that is going to end up increasing in value as the years go by. The good thing is that you are guaranteed to get a certain dollar amount back, even if your investment goes belly up. They cost anywhere from 1-2% of your annuity per year, which is worth it in the end.
Not doing everything you can with your guarantee.
When you pay the extra for that guaranteed payout, you need to take your money and invest it more aggressively than what you are doing with those investments that aren't set up with the guarantee on them. Since the lifetime guarantee annuities are determined based upon what the largest value of the investment is for the year, you can still walk away with a guaranteed amount even if the market goes down by a bit. Once the market goes back up, your amounts are going to rise as well. It's a win-win situation.
Instead of jumping into something that you know nothing about, spend some time talking with a financial adviser, like those at Fogel Capital, who can walk you through the process and make sure you get the right annuity for your needs.