For lifelong guaranteed payments the best option that comes to the mind is annuities. An annuity provides a long list of advantages why we should prefer it in comparison to the other investment methods. Well, it is good to know that annuities have so much in our advantages but not to ignore the demerits they provide us. It’s always good to look both sides of the coin in order to have a complete understanding of the concept. Focusing only on the positive side will only make us seem a fool.
The reason to buy an annuity is that it secures you, as you are alive. However, what if you are dead too soon after making an annuity. If that happens you will not receive the benefits you indented to receive. This is an unexpected thing to happen. This risk is accepted by most of the investor because it is common to all the investments made. Moreover, that cannot predict what is going to happen in the future and hence they take a chance. However, this is a disadvantage that acts against you. Well, this can be sorted out by adding a beneficiary to you.
The risk associated with the company
To ensure that you save the company has to be saving in the first place. The company you chose as your insurance should have a concrete financial strength. He can give you the income only if he is safe under all conditions years after year. Always keep him in your prayers because if he is gone you are gone too and that is not a good thing to happen. Luckily, there are some guarantees given to the investor by the states and governments in case of company’s breakdown. However, the process that has to be followed to receive your amount is a hectic schedule to follow. Hence, it will be always better if you choose a company with a firm foundation in the business.
Interest rates risks
The interest rates are subjected to market. They may rise and fall. You do not have a command over it. If that happens you are most likely to not get the payout, you thought of getting. If you were to buy an annuity when the rates are comparatively lower, it would be a smart idea to spread your annuity into a number of years starting today. Well, the future is uncertain but this may profit you. On the contrary, it may also happen that the prices continue, go below the margin. Knowing all the worst-case scenario is the best thing to do.
Annuities are confusing and a risky way to go. The best thing you could do is get yourself aware of everything before stepping in. You could look for Benjamin- Annuities for more details on annuities. This will give you peace of mind in the worst case also.