Annuity Review: Should You Buy Annuities?

Annuity Review Singapore – You’ve saved up over $100,000 in the past few years and you want to maximize your retirement savings. One way to do this is through a common type of investment called an annuity. Annuities are essentially savings plans which offer some guaranteed returns on your investment. The purpose of this blog post is to make you more knowledgeable about annuities, their benefits, and drawbacks and will hopefully answer your question: Should you put your savings in annuities?

What are Annuities?

Annuities are basically insurance products that pay a regular income for either a fixed-term or the rest of your life.

They are usually purchased from insurers (e.g. AIA, NTUC Income, Tokio Marine) and the income they pay can be a good source of retirement funding.

These days, some people have started putting their funds into annuities to supplement their retirement income.

Annuity Review: Types of Annuities in Singapore

Annuities are a type of investment that provides regular payments to you for a certain period of time, usually after retirement.

The buyer pays a lump sum or multiple instalments to a life insurer, who invests the money and promises to pay out a series of income payments at some later date.

There are two types of annuities:

Term annuities

These provide cash flow for a specific period, such as five or 10 years. Afterwards, there is no payment and the policy ends. This type of annuity is appropriate for those who need higher income for a certain period, but do not want a lifelong income.

Life annuities

These provide cash flow for the rest of one’s lifetime. A purchase payment is split into two parts: A return of principal and interest on the original investment (which can be guaranteed or not). And an insurance component that provides longevity protection (i.e., payments will last as long as you live). This type of annuity can be further refined by whether it is deferred (payments begin at a later date) or immediate (payments begin right away). A classic example of life annuity would be CPF LIFE!

Source: MoneySense

Annuity Review: There are several ways to receive your annuities, including:

Payout option: 

You receive regular income over a period of time that could be for the rest of your life or for a limited number of years. With this option, once you die, the payouts end, and no benefits are paid to your beneficiaries. However, the option of a “secondary insured” ensures that a policy remains in effect for another person in the event of the insured’s death.

Withdrawal option: 

The payout depends on how much money is in the account and how often you take withdrawals and for how long.

Lump-sum option: 

You withdraw all of the money in one payment.

What are the benefits of annuities? — Annuities Review

An annuity is an investment product that guarantees you a steady stream of income.

Here are some benefits of annuities:

1. Annuity gives you the option of either receiving your money in a single chunk. Or, in instalments for a specific period of time.
2. It allows you to plan ahead. Such as when to receive the money, how long to receive, and how much you’d like to receive every year.
3. With annuity, your retirement income is partially guaranteed while the amount of payout is decided by your own decisions and financial needs.

As your retirement approaches, you may be considering a variety of options for how to manage your savings. One approach is to buy an annuity. These financial products can be a good way to provide income during the later years of life. But they are not right for everyone, and there are many different types of annuities to choose from. This article will help you understand some of the basics, including when an annuity makes sense and when it doesn’t.

What are the drawbacks of annuities? — Annuities Review

One drawback is that annuities require investors to commit their money for a long period of time – often 10 years or more. During this lock-in period, investors might not have access to their money.

It is important to note that because annuities are made for the long term, there can be high surrender penalties if you decide to take your money out before maturity. Retirees might find themselves strapped for cash in case of emergencies as it would be difficult to access their annuity investments.

Finally, you have to pay fees. Annuities are complex products, and insurance companies charge fees to cover their costs in marketing, distributing, and servicing them. These fees come out of your returns, which can make a dent in your income.

Should you put your savings in annuities in Singapore? — Annuities Review

Should you put your savings in annuities? Here are some reasons why you might want to consider buying an annuity

if You:

1. Don’t have enough confidence in your investment skills and knowledge to manage the investments yourself.
2. Want to leave a financial legacy for your loved ones, but would like to see the money you saved last for as long as possible.
3. Need to guarantee a certain standard of living for yourself, even if the market or your investments dip or crash.
4. Want a guaranteed income flow that you don’t have to think about or worry about running out of money with.
5. Need the peace of mind that comes from knowing that you and/or your loved ones are financially secured, even if something were to happen to you, such as losing your job or getting into an accident.

Some additional benefits of annuities include:

Investing for retirement

If you are investing for retirement, an annuity is a good way to turn your savings into a steady source of income for life.

Diversifying your investments

An annuity can be used to diversify your portfolio if you are heavily invested in the stock market. This can help reduce the volatility in your investments.

Guaranteed income for life

You’re afraid of outliving your savings. Annuities can provide a safety net in retirement by guaranteeing lifetime income regardless of how long you live.

You can use an annuity to get a guaranteed income for life. For example, if you have bought a single premium annuity, you will receive a monthly payout from the insurer until you die.

Extra Income Upon Disability or Illness

Several annuities options offer additional income (which happens due to the onset) upon disability or illness. These are common features among plans nowadays. And can help soften the financial blow of having a disability during retirement early on.

Takeaway: Annuity Review: Annuities can be a good option for retirees.

An annuity can be a good option for retirees who are looking for a steady income. But they don’t want to take on too much risk. One big advantage of annuities is that payments can be guaranteed. Even if the market takes a turn for the worse. Since you can choose how much you want to get paid every month. And you can predict how long your savings will last, making it easier to budget.

See how annuities work:

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