Many senior citizens need an income during retirement in addition to their social security income.
Most of them are not sure if a bond or annuity would be a better option for them.
In this article, we will describe the pros and cons of bonds and annuities.
What are Bonds? Bonds can be issued by a corporation, bank, or the government.
Bonds fluctuate inversely with interest rates, meaning that bonds are up when interest rates are down and bonds go down when interest rates are up.
You will receive scheduled interest payments, but how often you will receive them depends on the terms of the bond.
When the bond reaches maturity, the organization that sold it to you will return the original cost of the bond.
If you pass away before your bond matures, the face value of the bond will be paid to your beneficiaries.
Bonds are also tax deferred.
Government bonds have a lower risk than bonds from banks or corporations, but there are still risks.
If you need to sell the bond before it reaches maturity, there is no guarantee on what you will get for it.
You may lose money if you sell it and there is no way to predict how much you could lose.
One problem with bonds as a retirement income is that after the date of maturity, you will not receive any more interest payments.
If you live for many years after the bond matures, you'll have to invest your money in another bond or other financial service in order to continue receiving an income.
What are Annuities? Annuities are sold by insurance carriers and usually have a lower risk than bonds.
Fixed annuities are annuities that have a set interest rate that will not change.
Indexed annuities have interest rates that fluctuate with the market.
Some indexed annuities come with a minimum interest rate that you are guaranteed to receive, regardless of the market rates.
Annuities usually provide higher income streams than bonds and they are also tax deferred.
When you pass away, your beneficiaries will receive the remainder of your annuity.
A huge benefit to annuities is that you can receive an income for life, meaning that you cannot out live an annuity.
This is great for retirement because you know that you will always receive a paycheck and you won't have to worry about reinvesting your money at any point.
Conclusion Annuities are a great option if you'd like a guaranteed income during your retirement.
Bonds can be a good option, but you do have to consider that you'll have to reinvest your money if you live beyond the bond maturity date and that you may lose money if you need to sell the bond before it matures.
Most of them are not sure if a bond or annuity would be a better option for them.
In this article, we will describe the pros and cons of bonds and annuities.
What are Bonds? Bonds can be issued by a corporation, bank, or the government.
Bonds fluctuate inversely with interest rates, meaning that bonds are up when interest rates are down and bonds go down when interest rates are up.
You will receive scheduled interest payments, but how often you will receive them depends on the terms of the bond.
When the bond reaches maturity, the organization that sold it to you will return the original cost of the bond.
If you pass away before your bond matures, the face value of the bond will be paid to your beneficiaries.
Bonds are also tax deferred.
Government bonds have a lower risk than bonds from banks or corporations, but there are still risks.
If you need to sell the bond before it reaches maturity, there is no guarantee on what you will get for it.
You may lose money if you sell it and there is no way to predict how much you could lose.
One problem with bonds as a retirement income is that after the date of maturity, you will not receive any more interest payments.
If you live for many years after the bond matures, you'll have to invest your money in another bond or other financial service in order to continue receiving an income.
What are Annuities? Annuities are sold by insurance carriers and usually have a lower risk than bonds.
Fixed annuities are annuities that have a set interest rate that will not change.
Indexed annuities have interest rates that fluctuate with the market.
Some indexed annuities come with a minimum interest rate that you are guaranteed to receive, regardless of the market rates.
Annuities usually provide higher income streams than bonds and they are also tax deferred.
When you pass away, your beneficiaries will receive the remainder of your annuity.
A huge benefit to annuities is that you can receive an income for life, meaning that you cannot out live an annuity.
This is great for retirement because you know that you will always receive a paycheck and you won't have to worry about reinvesting your money at any point.
Conclusion Annuities are a great option if you'd like a guaranteed income during your retirement.
Bonds can be a good option, but you do have to consider that you'll have to reinvest your money if you live beyond the bond maturity date and that you may lose money if you need to sell the bond before it matures.
