What You Need To Know About Annuities

Friday, April 23, 2021 | Leave a comment

As a follow up to our last educational article this will help answer any questions you may have.

An annuity can help provide income in retirement, offer growth potential, and protect what you’ve saved. You may laugh at the quip “90 is the new 70,” but there’s a lot of truth in it. Older Americans are living longer than ever. The Social Security Administration notes that a man who reaches age 65 can expect to live, on average, to age 84. A 65-year-old woman’s life expectancy is age 86½. Also, about one out of every four 65-yearolds will live until at least age 90.1 That’s why it’s important to ensure that your savings lasts a long time too.

Annuities are one way to help do that. An annuity is a long-term contract between you and an insurance company that’s designed to help you achieve a range of financial goals. Depending on its type and features, an annuity may help you grow your savings with taxes deferred, protect your money from market swings, provide guaranteed income for a period of years or the rest of your life—or all three and more.

There are three primary categories of annuities used to accumulate money for retirement:

Fixed, Fixed Index, and Variable (our firm does not provide). They can be purchased with a lump sum as a single premium or with periodic flexible premium payments. A single-premium annuity doesn’t allow additional contributions, while a flexible-premium annuity enables you to contribute additional funds over time.

Fixed Annuity:

This is a tax-deferred way to help grow savings at a predictable, guaranteed fixed rate. As its name implies, it provides a fixed interest rate, which is determined by the insurance company. This rate is guaranteed for a specific time period, such as one, three, or five years. After the rate period ends, you can renew your contract with another set time period and fixed interest rate. A fixed annuity can be converted into regular income payments when you retire by choosing to annuitize into a series of guaranteed payments for life or a specified period. A fixed annuity may be right for you if you’re interested in safety and preserving money, and are not comfortable with stock market risk.

Fixed Index Annuity:

A fixed index annuity (FIA) provides the security of principal protection, the opportunity to participate in market growth potential by tracking an index, tax-deferred growth, and predictable income. It provides an opportunity to earn interest based on the performance of an index such as the S&P 500®. A fixed index annuity can be converted into regular income payments when you retire by choosing to annuitize into a series of payments or by choosing an optional rider, for a fee, that would provide guaranteed income payments for life.

A fixed index annuity may be right for you if you’re looking for market-based growth with loss protection when you are saving for retirement, along with guaranteed income when you retire.*

Variable Annuity: Our Firm Does Not Provide

A variable annuity (VA) offers an array of investment options to help grow retirement savings and create steady income in retirement. You can choose from a range of market-based investment options. Your account value fluctuates depending on market performance. You need to be comfortable with taking a certain amount of market risk, as the market value can go up or down and you could lose money. A variable annuity can be converted into regular income payments when you retire by choosing to annuitize into a series of guaranteed payments or choosing an optional rider, for a fee, that would provide guaranteed income payments for life. Plus, you may be able to purchase an optional rider that would provide a guaranteed payout amount when you want to start taking income. A variable annuity may be right for you if you’re looking for higher growth potential and a broader range of investment options, along with the potential for higher income when you retire.

Generally, fixed and fixed index annuities have less investment risk than variable annuities. If you want growth potential coupled with loss protection, you might consider a fixed index annuity. If you’re willing to take on more risk for greater growth potential, the ability to choose investments, and the potential to increase your income, you might consider a variable annuity.

Please contact (704-451-7020), our firm for your FREE financial review and to discuss your goals and objectives. Based on your goals, we will make recommendations that would best fit your objectives.

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