Common uses for Annuities
Annuities have been in existence for well over two hundred years. The very first mention of Annuities in the United States was the use of these products by the Presbyterian Church in 1740 to provide security for the clergy and widows. Annuities allow you to accumulate tax-deferred funds for retirement and then, if you desire, receive a guaranteed income (this process is called Annuitization). Common uses for annuities are as follows:
Safe and Secure Retirement Income
The most common annuity contract is one that has tax deferred investment gains with the promise that the investment savings and gains will provide income in the future in the form of regular distributions. These days, human life expectancy can go well beyond the minimum retirement age, so retirees are looking for guaranteed lifetime income that is consistent, safe and secure. During the distribution period annuities can provide this assured lifetime income in the form of regular payments that do not fluctuate with the ups and downs of markets.
Most state and federal statutes protect annuities from civil liabilities, liens and debt claims. Many business owners and professionals, especially those that are susceptible to liability litigation, protect their wealth inside of annuities. It is important to check applicable exemption laws in your state before investing in an annuity for the purpose of asset protection.
Damages awarded from legal settlements, typically from personal-injury litigation, can be awarded through a Structured Settlement Annuity. These annuities are specifically structured to replace lost income using periodic annuity payments that mimic earned-income paychecks. These types of annuities remove the burden that a one-time lump sum settlement would create on the plaintiff to properly invest the money in a manner that would replace lifelong income. Structured Settlement Annuities typically have flexible income streams rather than level payments to allow for unexpected expenses such as medical expenses.