How do annuities really work? Most people don’t actually know. If more people were aware of how they worked, annuities would probably be a larger part of more people’s retirement plans.

Basically, you’re handing over a huge lump sum of cash to an insurance company, and you’re going to get a stream of payouts in return, usually over a whole lifetime. You’re essentially shifting the risk of the investment to the insurance company, but you will have less flexibility and possibly lower returns on the investment that you make.

There are benefits and downsides to buying fixed annuities.

The pros will be that you won’t outlive the income that’s provided from the guaranteed payouts, so you won’t have to worry about the performance of the market. This is a great concept for conservative investors, and the longer you go through life, the better deal you’re going to get through more payouts that you will be receiving.

On the downside, fixed annuities have barely any flexibility once you buy them, and with such a big investment, they can be kind of scary for retirees. When buying a fixed annuity, you’re definitely tying up a big portion of assets that might be left as an inheritance instead. If you die a premature death, your investment might be dried up entirely, depending on the kind of annuity you have acquired.

Furthermore, with interest rates as they are, fixed annuity payouts should remain pretty low. Annuities are a great way to guarantee financial security. Investment Management Solutions Inc. can help you choose an annuity plan to achieve the optimum level of investing for your future.