In an uncertain world, annuities can help provide steady, reliable monthly income for life.
An annuity is a contract between you and an insurance company. You’ll make purchase payments and your money can grow until you decide to receive the funds in regular payments. Annuities may also offer death benefits for your beneficiaries, so they can help with estate planning as well.
Annuities are not a one-size-fits-all solution, however. Here’s what to consider before you purchase an annuity so you can be sure to choose the right option for your unique needs.
FEATURES OF ANNUITIES
Tax-deferred growth. The money you set aside for an annuity can grow untouched by the IRS until withdrawal, giving you a larger sum to work with.
Flexible withdrawal arrangements. You can choose to withdraw from your annuity according to your individual needs. Since annuities are intended for retirement, taxes and penalties may apply.
Principal Protection of Fixed Annuities. Never lose principal due to market performance as fixed annuities are not invested in the market. Even during market downturns, your money will not be affected and you will not lose money.
Diverse Investment Options. For variable annuities, build an investment portfolio that’s diversified the way you choose and participate in the ups and downs of the market.
TYPES OF ANNUITIES
Immediate annuities. Used by those who want reliable income immediately (or within one year of purchase). With it, you can tailor income to fit your needs and create income that lasts for life.
Deferred annuities: For those who want to grow their money over time, but are willing to defer access to the money until retirement years.
TYPES OF DEFERRED ANNUITIES
Fixed annuities: Provides principal protection and the opportunity for growth through interest.
Variable annuities: Provides greater potential for growth by investing your money in investment options you choose and the ability to rebalance your portfolio based on your preferences and in a way that aligns with changing financial goals.
With fixed annuities, the company invests the funds and provides an interest rate to the client. With variable annuities, clients take on the market risk for potential losses as they seek potential gains.
