Annuities can provide people with a guaranteed stream of income when they need it most. While some financial advisors suggest that the best age to begin taking payments from an annuity is between 70 and 75, you don't have to wait until then to buy it.

You can purchase one from age 18 on up to your retirement years.

Your decision about when to buy should take into account things like your ret🦋irement income needs, financial goals, tolerance for market fluctuations, life expectancy, and the amount of savings that you have.

In addition, your decision will depend on the type of annuity you're considering.

How an Annuity Works

For most retirees, their overriding financial concern is for a secure income in the future, when they're no longer working.

As people live longer and rely more heavily on their own savings, the notion of converting a portion of capital into a guaranteed income stream 𝔍has its appeal.

In fact, annuities traditionally had one purpose. That was to turn a lump sum of money into income for li𒈔fe, or for a certain time period.

They were designed for peopl🎶e who were retiring or otherwis💖e needed a fixed, guaranteed monthly income.

Today, various types of annuities can be used to accumulate capital through investment, and provide guaranteed income.

Keep in mind that because payments are fixed, inflation can erode the value of income payments over time. So an annuity shouldn't be the only kind of retirement income you depend on.

The Monthly Payout

The monthly payout amount of an annuity is based on a number of factors, including your age and gender, interest rates, and the amount of capital invested.

Annuities pay out the full amount of principal and interest by the end of a certain period. If you want payments made for a 10-year period, for example, the payment amount will be base🐷d on the principal and total interest to be ꧒earned during that period, divided into 120 monthly payments.

If you want a lifetime income, the payment amount is calculated based on the number of months between your current age and your life expectancy age. If you are 65 and your life ex🌺pectancy age is 80, the payment amount is based on 180 months. Even if you live beyond your life expectancy, the monthly payments will continue.

When to Buy an Annuity

Assess Your Retirement Goals and Savings

Start by figuring out how much money you'll need and want in retirement. Then note the amounts you have saved and invested in a 401(k) and an individual retirement account (IRA).

Don't forget any funds in an emergency savings account and a taxable brokerage account. In addition, estimate what you'll receive in Social Security benefits every month.

Comparing what your financial needs will be to investm💖ents that you have now and may have in the future (based on an expected return) can help you determine if you need to buy an annuity now, later in life, or even at all.

Consider Your Life Expectancy

Developing an idea of how long you may live can inform your annuity purchase decision. First of all, if you expect to live a long time, an annuity's monthly payments may come in handy if your other income sources dry up.

In that case, buying a deferred annuity earlier in life may be a good choice. The longer the period of time you have before you start annuity payments, the greater the monthly payout can be. (But bear in mind, it will involve substantial fees given the length of time it's administered.)

However, annuity payment amounts get larger the older one is because life expectancy grows shorter. So there's also the case for buying an immediate annuity later in life.

Examine Your Investment Preferences

Perhaps you feel that money you invest and manage in a brokerage account (in addition🏅 to your retirement acco🐭unts) could earn a greater return over time than an annuity.

O📖r maybe buying a deferred annuity has more appeal, given that income is guaranteed and it has time to grow tax-deferred and compounded over many years.

Understanding the potential each financial product ꦬhas can help you decide when, and even whether, to buy 🍃an annuity.

Compare the Type of Annuity

Income Annuity

When you buy an 澳洲幸运5官方开奖结果体彩网:income annuity—also known as an immediate annuity or an 澳洲幸运5官方开奖结果体彩网:immediate payment annuity—you enter into a contract with a life insurance comไpany.

The insurer agrees to make fixed monthly income payments to the buyer in exchange for a lump sum of money. The immediate annuity starts paying income as soon as the policy has been initiated. This is an attractive choice for older individuals who may be in or ne🎃ar retirement.

Deferred Annuity

In contrast to the immediate annuity, a 澳洲幸运5官方开奖结果体彩网:deferred annuity starts paying guarantꦺeed inco🐭me to the annuity owner years after it is bought. In the meantime, the buyer pays into it regularly. The money is invested and grows tax deferred.

The deferred annuity is often bought by younge♚r investors who have a long time frame before retirement.

Fixed vs. Variable Annuities

澳洲幸运5官方开奖结果体彩网:Fixed annuities guarantee a minimum interest 🦋ra൲te on money invested in the contract. There will be an initial interest rate. After a period of time, the rate will change. The new rate is called the renewal rate. It must always be at least the minimum rate.

The interest on 澳洲幸运5官方开奖结果体彩网:variable annuities, in contrast, can fluctuate because it is b🐻ased o꧙n the performance of the investment portfolio for the annuity. So there's greater risk involved.

Thus, fixed annuities have more predictable return♊s than variable ones, and less risk.

The Bottom Line

Some financial advisors sugg♛est that anywhere from 50 to 70 years of age is the righ🎐t time to buy an annuity.

But the best age to purchase one, if you decide an annuity is even right for you, ಞdepends on a number of factors, including your current finanꦑcial circumstances and investments, risk tolerance, longevity prospects, and expected income needs in retirement.

That is, the best age to get an annuity is when you are able to optimize its benefits for your expected needs.