When you have dirty laundry, you dump it in the washing machine, set it to full cycle and let the debris wash away. You’ll repeat the very same chores with a new load of laundry, and problem is solved. But when it comes to life and money problems, there is no clear-cut solution and all you can do is strive hard and hope for the best.
Looking at the depressive current economic condition where college graduates are forced to do odd jobs, this calls for immediate financial remedial actions. And the scenario is somewhat similar to the older working generations where some of them are literally forced to retire because companies are more inclined to hire young graduates as they are willing to work with less pay.
As these senior citizens become out of work, it’s such a pity to see them struggling in the aspects of financial. Some of them have no other options but to use their savings to support their living. This is such a worrying condition because many of these people may lose their savings in just a few years if they can’t find a new job.
When things get worse, it’s a relief knowing that insurance companies are always there to help you in the financial aspects. If you are covered by the whole life insurance policy, it means your future is somewhat secured. You can buy insurance by paying premiums or handing over a lump sum of money to the insurance company. If you have been paying premiums, your insurance cash value may not be that high if you have many more years to come to the end of your contract. If you are stranded in this situation and you want to find a better way to fund your future, perhaps it’s time that you consider converting your insurance coverage into annuity.
Before you proceed with the converting, it is vital to be aware of the pros and cons when an insurance policy is changed to annuity. You might need to deal with taxation requirements on the amount of funds withdrawn from your insurance account. There is also a possibility that the benefits for your beneficiaries may be affected.
When you withdraw the funds from your insurance account, you might be required to pay for surrender charges. There are several payment options to choose from, so this matter is best to be discussed with an insurance agent. You may be given the option to go for total or partial surrender. The charges may become lower on the recurring date that you started the insurance policy. It means if you buy an insurance policy say, on 31st December this year, the surrender charges may be reduced on the same date next year and all the years to come.
If you have withdrawn money from your insurance account so that the cash value would be reduced and that you could shorten the payback period before the 16th year, then converting to annuity might not be the best option. Withdrawing your funds from a whole life insurance account may affect the benefits meant for your beneficiaries. Nevertheless, if you have no responsibilities to support your spouse or children because they are independently well off, then converting a whole life insurance into annuity is a very good idea.
It’s crucial that you know the different types of annuities so that you can benefit the most from the chosen plan. Annuities are divided into two common types, i.e. immediate and deferred. If you need money straight away and you feel more secured with a fixed amount of funds received every month, then the immediate annuity is the best option for you. Once you have handed over a lump sum of money to the insurance company, you may receive monthly payments almost immediately.
If you want to take advantage of the growing economic condition and that the annuity can bring more returns than your existing whole life insurance policy can, then a deferred annuity is the better option. However, this option is more beneficial if you don’t need to use money immediately. Take note that you can always convert deferred annuity back to the immediate plan if there is an emergency situation that requires you to receive immediate payments.
Both immediate and deferred annuities can either be fixed or variable. The choice is up to you, and it depends much on your readiness to deal with risks. In general fixed annuities may provide you with steady payments. You can pay a small amount of initial capital in order to start enjoying the benefits offered by this plan. Thus, fixed annuities are suitable for cautious investors. Variable annuities provide investors with flexible returns. Investors may gain huge financial returns during periods of economic prosperity. However, when the economy is down investors are affected in the sense that they may receive lower returns.
Your best plan should be to work for as long as you can so that you may increase your savings. Then, make use of the whole life insurance or annuities, whichever applicable. And yes, both plans are trustworthy.
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