Unluckily, recent studies have revealed that numerous senior citizens within the United States are dealing with financial problems. It appears that they are running out of money due to the awful U.S. recession.
Since things donâ€™t seem to improve, seniors are forced to take action in order to guard their financial health and be sure that they can afford a medical plan after retirement. The Center for Retirement Research at Boston College has recently declared that a normal married couple will necessitate about $197,000 in order to pay for their healthcare expenses, and in this huge sum of money, the cost for nursing home care isnâ€™t included. These enormous health expenses are a serious issue, but the good thing is that an annuity, correctly utilized, has the possibility to help seniors considerably diminish the huge cost featured by the health care they need.
What exactly is an annuity?
An annuity is an agreement made between an insurance firm, and you, the annuity possessor. So, it means that you will make an investment, and the insurance company accepts to provide you either regular series of payments or a single sum of money at a certain moment in the future, generally after you stop working and choose to retire. There are two sorts of annuities, and you must select the one that matches your necessities, and that is suitable for your age. Seniors should know that there are two main types of annuities available, namely deferred and immediate. Prior to opting for a plan, make sure to read through the terms and conditions of both of them. In the following lines we will talk more about their benefits.
Deferred annuities: When you opt for a deferred annuity, you will get your money at a specific time in the future, commonly when you retire. The majority of deferred annuities permit regular withdrawal payments which start a month after you buy the annuity, and generally you can get up to 10% every year. When you choose a deferred annuity, you have the possibility to invest all the money straight away, or you can make intermittent payments. The payments can always feature the same amount of money, or you can choose variable payments. The amount of cash you invest continues to increase tax-deferred until you want to start getting payments. According to several studies, it appears that the majority of individuals opt for deferred annuities, since they are the most appropriate when it comes to long-term expenses featured by health care for senior citizens.
Immediate annuities: If you choose an immediate annuity, you have the possibility to get the payments right after you deposit the first sum of money. Immediate annuities are recommended for those who necessitate urgent revenue from the annuity they buy.
An immediate annuity allows you to opt for the term. Hence, you get to decide for how long your income will last. In numerous cases the elderly opt for a specific number of years, and they donâ€™t usually go for life annuity.
What are the main benefits of annuities for the elderly?
New regulations that came from the federal government support deferred annuities. According to the Pension Protection Act of 2006, elderly people have the possibility to utilize these annuities in order to make payments for long-term care insurance. This is a great tax advantage for those who utilize annuities. Until 2006, the Internal Revenue Service regarded annuity payments as earnings, and this means that they were taxed just like a standard income. Now, thanks to the new pension act, this doesnâ€™t happen anymore, and these withdrawals are no longer taxed.
Probably the simplest method to utilize annuities in order to compensate for long-term health care expenses is to purchase the so-called â€œhybridâ€ insurance policy that features life insurance and annuities. However, the greatest advantage that one can benefit from when utilizing an annuity is represented by security. The income that the possessor has to receive will get to him until he/she dies.
Overall, we should point out that annuities can help the elderly pay for their healthcare regimen. There are certain plans and coverings available for seniors, and the best way to know youâ€™re safe is to consult with an expert in the field first.