Vanguard annuities

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The Benefits Of Vanguard Annuities

When used properly, annuities can be a good investment for your retirement. With that in mind, annuities are not for everyone. So before investing in Vanguard annuities or any other annuity, be sure you understand the pros and cons of annuities in general. The concept of an annuity is basic; you pay in and then when you want to use the money within that investment, you receive a steady flow of regular income payments.

Your personal financial situation will determine your need for an annuity. Your life’s events such as your need to save for retirement, college funding or an emergency fund all affect the type of investment vehicle you choose.  The Vanguard annuities website has an annuity calculator which can help you determine how your life events effect your investment needs. Check it out.

Annuity Characteristics

Annuities have certain characteristics that other investments do not offer. Let’s review those first.

  • Annuities offer a steady flow of income
  • They insure against outliving your money
  • Annuities are sold by insurance companies
  • Some annuities allow you to defer, but not eliminate, paying income taxes
  • Your money in most annuities is locked in for a certain period of time
  • Your money is guaranteed by the insurance company not the FDIC
  • They charge different fees than other investments

Types Of Annuities

There are many types of annuities. They type of annuity you buy will depend upon what you need the investment for. Fixed annuity payouts are predictable; you receive fixed payments unlike a variable annuity where your payments can vary. An immediate annuity starts the payouts right away, vs a deferred annuity which delays the payout period to a future date. Again, understand what you are investing in before you make your purchase.

Annuities Pros and Cons

The Pros – Good Supplemental Income

  • The tax-deferred benefit allows your money to compound year after year
  • You can supplement your Social Security and other retirement investments with an annuity
  • With certain payout options, you will not outlive your money
  • Your beneficiary can also receive lifetime income, with certain payout options

The Cons – They Can Be Expensive

  • If you close out or make withdrawals before the surrender period, you will be paying surrender charges
  • Annual contract fees
  • Mortality expenses within a variable annuity
  • Mutual fund fees within a variable annuity

It is so important to understand and feel comfortable with any investment before you make your purchase; and the same is true with annuities. Do your homework.