An annuity is an insurance contract designed to provide income in the form of regular payments while also offering the potential for growth. Annuities are most commonly thought of as a way to create a steady and reliable income stream for retirement.
Unlike life insurance, annuities provide insurance against the risk of outliving your money after you stop working. You get the potential to grow your savings and create guaranteed income for life, helping you to retire your way.
While pensions and Social Security benefits can offer some inflation-adjusted guaranteed income for retirees, they often are not enough to replace earnings and do not provide opportunities for market participation and growth.
Annuities may seem to function as an investment (that is, you put your money in and accept the risk of whether it increases or decreases). However, they’re actually insurance contracts with predetermined parameters. In general, if you follow the rules of the annuity contract, you receive certain guarantees in return.
Some annuity products are funded with a one-time contribution, while others allow for future premium payments to be made.
When the time comes to start receiving payments, also referred to as “distribution,” you will receive those payments based on factors including your age, your annuity’s accumulated value, and more.
Annuities are designed to help protect against longevity risk (the risk that you may outlive your retirement savings). They can also help you accomplish other important goals, such as leaving a meaningful legacy for your family or achieving tax-conscious portfolio growth.
Like any other written contract or financial product, it’s important to consider both the potential benefits and terms of the agreement carefully to determine if it’s the right fit for your unique financial needs. Your financial professional can help you accomplish this. The good news is that today there are more options than ever when it comes to finding an annuity that fits your financial goals.
Annuities come in different types to help meet different needs. One of the ways they vary is by the amount of potential risk and return. Immediate annuities have less risk and lower return because they simply convert an amount of money into a guaranteed stream of income. The annuities with increasing risk and return are generally used to accumulate money over time. Because they don’t provide immediate income, they’re known as deferred annuities.
Income you can count on.
An immediate annuity helps make retirement planning easier because it’s predictable. In exchange for a lump sum of money, an immediate annuity pays a guaranteed amount for a specified time period, including as long as you or your spouse live.
Protect and grow your savings. Plan with confidence.
A fixed annuity provides you with tax-deferred growth at a fixed rate of interest set by the annuity provider for a period of time specified in the annuity contract. It also offers the opportunity to produce a guaranteed stream of retirement income you cannot outlive.
Pursue growth potential without sacrificing security.
With a fixed indexed annuity, the interest on a portion of your premium is tied, in part, to a published stock market index, giving you the opportunity to benefit from market trends without owning stocks. Your principal is protected from loss due to market downturns. A fixed indexed annuity may also include or offer optional riders that can be purchased or automatically attached to the annuity for a charge. Rider features vary by product, and can offer benefits like lifetime income, increased liquidity, or a death benefit option.
