The History of Annuities

Selling your structured settlement

Have you started to plan for your retirement? If not, it may be time to look into buying an annuity. Owners often demonstrate a unique loyalty to their annuity purchases, with 93% reporting that they still own their first annuity.

What are annuities? They are insurance products that provide long-term income via a steady stream of future payments. Normally, people will buy annuities to help manage their income in retirement, while others use them for beneficiaries.

History of annuities Historians believe annuities existed as early as the Roman Empire, which used them as a lifetime income strategy. Today, there are various benefits that each type of annuity can offer someone going into retirement. There are state and federal laws that also protect annuity holders as well as structured settlement owners.

The annuity landscape has changed over the past few decades; it has evolved from people purchasing annuities for retirement to annuity owners selling their payments early for immediate cash to pay off debts or purchase a new home.

How does it work? Buying annuities assures that you will have retirement money. The money you put into an annuity over the course of a few decades is tax-deferred. Eight out of 10 non-qualified annuity owners have annual household incomes below $100,000, but many people believe annuities are beneficial to their retirement plan.

What happens if I sell my annuity? Sometimes life can interrupt your financial plan (buying a new house, paying off college debts, etc), and you may have to sell payments and access your funds early. Variable annuities are not advised for short-term goals because heavy taxes and insurance company charges may apply if you withdraw your money too early. However, you will receive immediate cash.

Common types of annuities:

  1. Immediate. This is an annuity lump sum payment, which guarantees income instantly.
  2. Lottery. This type of annuity disburses payments over a period of years instead of paying a lump sum.
  3. Pensions. These are fixed annuities; they pay the retiree a periodic, fixed amount based on your previous salary.
  4. Deferred. This type delays payments during the accumulation stage, and later distributes the payments in the payout phase as a lump-sum payment or periodic payments.

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