The financial management company Azoras has launched a video instructing viewers on the reasons for avoiding the three kinds of annuities in order to ensure long-term financial health.
Azoras, a personal finance expert, has launched a video explaining the pitfalls of annuities. The video is applicable to citizens of both the U.K. and the U.S.
For more information, please visit https://www.youtube.com/watch?v=_CpKjNAXx2g&ab_channel=Azoras
The video, titled “Annuities: Why You Should Avoid Them” was launched in response to increased worries about future financial security in the wake of the pandemic.
An annuity is a long-term investment, issued by an insurance company, in which a series of payments is intended to accrue interest and then be disbursed on a regular basis to help prevent a person from outliving his assets. Annuities may be scheduled for a lifetime or for a fixed term, which pay an income to an individual for a set period of time.
The video teaches viewers about the three types of annuities: fixed, indexed, and variable, each coming with its own risks and payoff potential. In a fixed annuity, interest accrues at about the rate of a standard savings account, and while the payout is a guaranteed amount, the annual return is minimal.
In an indexed annuity, there is also a guaranteed minimum payout, but a percentage of the return is subject to the performance of the market index. In a variable annuity, the type of annuity with the potential for the highest return and also therefore the type with the greatest risk, the retirement payouts are based on how well a person’s mutual funds perform.
After explaining the types of annuities, the video offers three reasons for avoiding annuities. First, returns are generally quite low. Second, annuities often come with surrender charges or hidden fees. Third, the income received from an annuity is taxed at regular income tax rates rather than long-term capital gains rates, resulting in an individual’s paying more in taxes.
The video encourages people to consult with a financial advisor before making any withdrawals from their pensions or enrolling in annuity plans.
Interested parties should visit the above-mentioned website.