By Dez Duran-Lamanilao

Guaranteed income is hard to come by these days. With the increasing household expenses and emergency spending that families have to constantly deal with, it becomes even harder to secure one’s future.

Insurance companies have a wide range of options that can help you plan your retirement. One of these is an annuity, a low-risk investment fund in which the insured can make a lump sum Payment at the start of the contract or series of payments in order to be eligible to accept regular disbursements starting either immediately or in the near future, more commonly known as deferred annuities. The insured has the option to receive it only for a specific duration or until one’s death. Of course, the payments will vary accordingly.

Annuities can also be categorized as either fixed or variable, depending on whether your agreed payout is a fixed amount or dependent on the overall performance of the market or group of investments. With a fixed one, the insured is guaranteed at least a minimum ROI rate. With a variable annuity, you can choose from a wide array of options called subaccounts that will allow you to direct the allocation of your contract value among these accounts.

Some tips to consider when buying annuities:

• Time your purchase. This means that you should neither be too young nor too old when you decide to buy one.
• Higher interest rates may mean more income for the same amount of payment. Staying updated when rates increase can save you a lot of money.
• Don’t spend all your hard-earned money on annuities. Just buy what you need – as it is always risky when you invest all your savings in just one type of financial product.

People tend to have misconceptions about the word “annuity,” so it is best to discuss your options in detail with an insurance expert. Bear in mind that annuities are not investments but rather are considered as contracts. This means that you are entering specific contractual obligations and breaking this contract may result to financial burden that one may not be ready for.

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