The secret to feeling good about your retirement is being certain you’ll have money for as long as you live. An annuity is a tax-deferred tool that can guarantee you an income even if you live to be 100. It’s a great way to help fill the gap between what you currently have coming to you—through pensions, Social Security, savings—and what you’ll actually need to live.
What is an Annuity?
An annuity is a contract between you and an insurance company. The insurance company invests your money for you, and, depending on your annuity, you may receive a regular payment based on the success of the investments. Income on annuities is not taxed until withdrawn from the contract, making annuities a tool to save for retirement.
A fixed annuity provides a guaranteed interest rate* for a fixed period of time. Here’s how it works: You give a check to an insurance company, and they invest it. The interest rate you are paid will be periodically adjusted up or down, but it will never go below the guaranteed rate. As a result, you will always receive a guaranteed minimum level of return.
A variable annuity is a contract with an insurance company where you give them either a lump sum or series of payments—and they return your money, usually after retirement, with a steady stream of payments. In the meantime, your money is invested and is free to grow, tax deferred, until you take the money out. Variable annuities provide more options for investing your money, so potential returns are higher than fixed annuities, but the risk is also greater.
Apart from these annuities there are several additional types and it can all be overwhelming.
Unsure which annuity is best for you? We can help you find the best product for your situation. Contact us today to get started.