Retirees often want to know how quickly they can get to their money in case they need to cover extraordinary expenses such as a medical emergency, or a home or auto repair. This need for liquidity may cause them to avoid and insurance annuity. However, when you look closely, you will see that insurance annuities can possibly provide access to funds that can accommodate many circumstances.
For instance, what if you need to take out money before the insurance annuity matures? Most annuity companies will let you remove a portion of your account’s value each year without paying a withdrawal charge. This is usually 10%, and once the surrender charge period expires, you will be able to withdraw as much as you want without paying any penalties to the issuer. But an insurance also can allow for other circumstances.
Suppose you are worried about money for future long-term care or a medical emergency. Some annuity companies will give you penalty-free access to your funds if you have to go to a nursing home or come down with a critical illness.
And what about income?
If your situation changes and you need income from your insurance annuity, you will have the opportunity to annuitize the contract and receive payments for a fixed period or life. This option is available after one year of buying the insurance annuity. Once you annuitize the contract, the annuity is not considered includable for Medicaid qualification purposes in some States (the income could be, however).
What happens when you die? Will your survivor get the money he or she might need?
The annuity company will transfer the account’s value to your designated beneficiary without any surrender charges, penalties, or probate fees in almost all cases (you can check this in the contract first).
Do you think that there is a chance that creditors might come after your money? Many states’ laws protect insurance annuities from creditors.
So before you decide that insurance annuities do not offer the ease of access that you might need to your funds, look at the complete picture. Examine what you might need this money for—what situations would you consider potential emergencies? It is possible that an annuity company has just the right option for you.
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