Investments: Why you should consider annuities in your retirement planning
May 16, 2019 by Selena Maranjian
Annuities are contracts between you and an insurance company. In exchange for a typically large sum of money, the company promises to pay you a lump sum at some point or, more often, a monthly sum. The payments start immediately or at some point in the future and can make your retirement more secure. Annuities are well worth considering as part of your retirement plan.
But there is a lot more to learn before you buy into any annuities, though, including the difference between fixed, deferred, indexed, and variable annuities. Here is a quick review of what you need to know.
Where did annuities come from?
Annuities existed in the ancient Roman empire and possibly in ancient Egypt. The more modern history of annuities and annuity-like arrangements can be traced back to Europe in the 1600s when several thinkers proposed similar arrangements. Many people would contribute a sum of money into a pool, and thereafter would be paid a share of it regularly. As members of the group died, the smaller pool of money would be divided between fewer people, permitting those who lived very long lives to continue to receive funding from it.
In America, annuities became commercially available in 1812. Over many years, they have grown into a big business, with sales of fixed and variable annuities totaling $192 billion in 2017.
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