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In a single premium annuity, the rate of interest is fixed and it is not affected by the market fluctuations. During the contract period, funds invested in an annuity cannot be withdrawn unless the customer is prepared to pay a potentially hefty surrender charge, and, if the customer were to make such a withdrawal before reaching the age of 59 1/2, there would be a tax penalty too.
A single premium annuity has its own advantages and disadvantages when compared to flexible premium annuity. A disadvantage in this kind of an annuity can be that the customer cannot withdraw from this and invest in another attractive offer prevailing in the market and thereby losing out on certain lucrative offers.
There are many benefits also of a single premium annuity like there is a guaranteed interest which can be an attraction to many investors. Single premium annuity might be the right choice only for a certain section of people; for people who would like to go in for one time investment or to those who are comfortable investing in a product that can offer a multi-year guaranteed rate of return. One should decide on a single premium annuity by taking into consideration one’s own needs and requirements.
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