At What Age Should I Buy an Annuity?
An annuity is a contract between an individual and a financial institution like an insurance company where the individual provides a lump-sum payment to the insurer. In return, the insurer invests the money on a tax-deferred basis and gives it back to the policyholder in the form of regular guaranteed income.
According to timesonline.com, an annuity can be bought up to age 75. Age is one of the major factors that determine the return on your the investment. Typically, older annuity holders get better rates than those who are expected to live longer.
Purchasing annuities can be very beneficial in the long run. You can purchase an annuity that passes directly to your beneficiaries. The important thing here is that it does not take a lot of time for your beneficiaries to receive the annuity money.
This is a big advantage because legal procedures are usually time-consuming, particularly when it comes to property and assets of the deceased. Another benefit is that the income you receive from annuities is tax-deferred; however, if you withdraw your annuity’s gains, the money will be subjected to taxes.
When to Purchase an Annuity?
Most people purchase benefits annuities between the ages 50 and 75. The age at which you resign is a factor
Factors Determining Size of Annuity
Keep in mind that your age is one of the important factors that determines the your monthly returns on an annuity, with the others being your state of health and gender.
Basically, the older you are at the time of an annuity purchase, the higher the interest rate. This is because the insurance companies offering this financial product are unlikely to give you higher returns on your annuity purchase if you’re expected to live a longer life.
Likewise, if you have a severe illness or medical condition expected to reduce your life expectancy, you will be eligible for higher annuity quotes because you are likely to live fewer years as compared to someone in perfect health at the same age.
It has been observed that smokers and obese people also get better annuity rates because they are eligible for “impaired life annuities.” Impaired life annuities are for people with shorter life expectancies due to ill health.