What you should know about investing in annuities as a business

Investing in annuities can help your business meet some mid to long term goals. Annuities are a type of insurance product that can be extremely useful in retirement and in hiring and retaining employees. Understanding more about them however is crucial to deciding if they are right for your business.

How does an annuity work?
While some businesses offer traditional life insurances, others offer and are considering investing in annuities. By purchasing an annuity you basically receive a series of periodic payments that are guaranteed to amount and the payment period. Thus annuities can offer businesses a great incentive for their employees. If you decide to have your annuities guaranteed over a life time you can virtually have a guaranteed income until the day you die. And on the contrary, if you put your funds into a traditional investment type you might run out of funds before your death.

Earnings made from annuities are also tax deferred, which means that businesses do not tax you until the annuity is actually paid out. It is a win-win situation for both the employer and the employee. Tax deferral gives your invested funds a better chance to grow; more quickly than they would in a taxable investment.

What does an annuity do for investors?
There are usually two main reasons why individuals invest in annuities:

1. The first reason is that they want to save some money for a long term goal


2. The second reason is because they want a guaranteed stream of income for a specific period of time.

For the second reason alone many people invest in annuities; they want some guarantee of retirement. Like many other investments however, you cannot take your money out during the growth period without incurring major taxes and penalties, so it really only makes sense to invest in an annuity if you know that you are going to leave the money there for at least ten years. As a business looking to invest in annuities, these two main reasons hold many benefits for your employees but as for the business not many benefits.

How to go about buying an annuity
Even though most annuities are sold and purchased through insurance companies, you can buy them sometimes through banks, stockbrokers and insurance agents. How much you will pay for them will vary considerably and so will the quality of the product so you need to shop carefully and make sure you're getting your money's worth.

Here are some helpful suggestions in buying an annuity:


• Know the Insurance Company. Before you even go into looking at which types of annuities to buy make sure that the company you are purchasing from or individual/ bank as financially sound. The financial stability of the insurance company is your only guarantee you can rely on since these types of investments are not backed federally.


•  Shop around. Don't feel like you have to buy for the first contract you are introduced to. Investing is like any other big purchase you make. Shop around and get familiar with all of them and with what everyone has to offer.


•  Be familiar with all types of annuities. Knowing and understanding all types of annuities will give you a better chance of finding the one that is right for you and your business. There are about six different types to invest in; single-premium, flexible-premium, immediate annuities, deferred annuities, fixed annuities, and variable annuities. All will vary in how the money is paid into the contract, how money is withdrawn, and how the funds are invested.

These are just the basics of what you should know about investing in annuities as a business; there is obviously much more one can learn in order to make the best decision possible.