Taking A New Look At Annuities


 Taking A New Look At Annuities

Income for life.

Annuities have been synonymous with retirement since the 18th century, and they are still one of the most successful ways to build wealth and provide income for life. However, annuities have a few drawbacks that many people may not know about: they're expensive, don't provide immediate benefits, and can be difficult to understand. Thankfully today there are no-annuity investments for those who want an income but don't want to take out a loan or pay hefty fees in order to do so.
This article will review the risks of annuities and how to use a no-annuity investment that can provide you with income for life while eliminating the drawbacks.
Risks of Annuities
Annuities are long-term investments that are designed to provide consistent income distributions over a long period of time. However, there are some hidden risks of annuities that people aren't aware of:
Loss of Principal  – With annuities, you'll never see all or any part of your funds again. The fund managers make money by investing in derivatives and other measures so they can keep your money until retirement to pay your retirement benefits. If there are changes in the market, your new investments will be made, and you'll never get the money back. Of course, this depends on how much money you put into an annuity.
Risk of Inflation  – Annuities are based on a fixed value for money; as inflation (or deflation) increases, so will your annuity. However, with no-annuity investments, you can adjust the amount you receive each month to compensate for inflation. This is especially helpful if your income gets crunched by inflation over time.
Lack of Control  – Annuities are rarely tax-free, and they may not be able to provide all of your income needs. It's also possible that your annuity value could drop due to market conditions, and since you can't withdraw from it you'll just have to wait out the market until it recovers. No-annuity investments can be withdrawn as needed.
Annuities can also come with hefty fees, so you need to consider whether the benefits outweigh the cost of ownership when choosing an annuity for yourself.
No-Annuity Investment Options
When making a no-annuity investment for long term use, you'll want to consider which type of investment best suits your needs: stocks or bonds. Fortunately, no-annuity investments are available for both, so you can choose the type that best fits your investment goals.
Stock vs. Stock Mutual Funds:
"Stock" is a general term that means "investment." Stocks are usually defined as bonds or other forms of non-fixed income. However, there are different types of stocks: corporate stocks, equity shares, stock trusts and preferred shares. Stock mutual funds and exchange traded funds (ETFs), among others, offer multiple different types of stocks to investors; each with a unique set of benefits and risks.
Stock Mutual Funds (Mutual Funds) – These allow investors to pool their money together in order to buy multiple stocks at a lower cost than buying them individually. Instead of having one or two stocks, mutual funds provide investors with dozens of different types of stocks. This gives investors the benefit of diversification while spreading the risk between multiple sectors. However, since mutual funds are managed by an individual or team, this also means that there will be fees attached to your investment—which may or may not be tax deductible.
Stock ETFs – Exchange traded funds trade just like a stock on an exchange market; however, they act like mutual funds by allowing you to buy and sell shares as needed and providing tax breaks for long-term investments. The costs are cheaper than buying individual stocks, but the fees are usually higher than mutual funds.
The Bottom Line: Some No-Annuity Investments Can Be High-yield Options
Let's go back to our original scenario of retirement and provide an example of a no-annuity investment that can make up for harsh living expenses. Let's assume you live in a city and move there from the country. After moving, your living expenses will be much lower. But you're going to want to keep some money for emergencies, because even if you don't spend it on food or rent, you'll still need money for unexpected expenses such as fixing your roof or replacing your car battery.
Now let's use some numbers to help us analyze the problem. Let's say you live on as little as $1,000 per month. You also get an annual 3% return on your investment, and all your salary is paid into a retirement account where you can withdraw at any time without penalty (except social security taxes). We'll assume this scenario in our future example:
Interest Rate: 3% Annual Return: 3% Total Needed: $2000** Annual Income: $1500 Monthly Income Multiplier: 2** Annualized Return Needed to Cover Monthly Expenses in Retirement** $1500 annual income is just the amount needed to cover monthly living expenses in retirement. Inflation is assumed to be at a low 2%, so you can add $200 per year and have an extra $1,000 to allocate towards a reserve account.
Private Investments:
If you live on $2000 per year, then you're going to have a problem with your monthly income. If you invest completely in stocks, then your return rate will need be above 6.7% (or 1.9% monthly). On the other hand, if you invest completely in bonds, then you'll need over 7% (or 2.1% monthly).
The moral of the story: no-annuity investments are a viable way to provide you with long term income. As long as you're well educated on your investments, you'll be able to get the return you seek. If you invest in stocks, then make sure it's all in high-yield savings options—that's where the most reliable returns can be found.
If you have any questions about cash flow issues, income needs or other financial topics, please feel free to contact me through our website at Alaska Financial Solutions . You can also review our company information and read client testimonials by clicking here . We look forward to helping people like you achieve their financial goals.

This should be enough information for you to get started on your search for the right annuity. Further, our site also provides you with information about financial planning software (such as the one we use) and other useful tips that can help you improve your experience with financial planning and investing. Also, please don't forget to check back here from time to time as we continually update this page with newer posts. Happy investing!
Please note that annuities pictured in this article may not be available in your area at the present time; however, they are common examples of what an annuity can provide you.

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