29 Jul 3 Annuity Myths That Are More Fiction Than Fact
When combined with wise financial habits, having an annuity can be one of the best tools at your disposal to help you manage your funds over a long-term period. However, because the average person isn’t an annuity expert, there are plenty of myths and misconceptions about what annuities are and what they can achieve.
Not sure if what you know about annuities is as accurate as it should be? To sharpen your knowledge of annuities, we’ve busted three of the most pervasive myths surrounding this surprisingly advantageous financial tool:
Myth: Annuities are impossible to understand.
Fact: While the mathematics behind annuities might seem too complex to comprehend, the truth is that annuities themselves are a pretty simple concept. In an annuity, you simply pay your insurance company a sum of money in exchange for a guaranteed income for a set amount of years. There are different types of annuities, but this principle will always remain the same.
Myth: Annuities have a lot of hidden expenses.
Fact: While there are a few charges and expenses associated with annuities, these fees will never be hidden from you. Typically, annuities are subject to income tax if the payments begin before you reach age 59 1/2 — the rate of income tax will never exceed 35%. In addition, you’ll likely pay an annual annuity fee, which can be as much as 3%.
Myth: Once I get an annuity, I’ll never be able to access that money again.
Fact: This couldn’t be more false! If, for any reason, you need to access the money stored up in your annuity early, it’s possible to sell fixed annuity payments in exchange for a sum of cash. Selling an annuity settlement can allow you to get out of a financial crisis, make an investment or place a down payment on a major purchase such as a house. Just be careful — if you sell annuity payments too early, you could be faced with an early-withdrawal fee.
Have any other questions, comments or thoughts about selling an annuity settlement? Feel free to let us know by leaving a comment below.