Which Annuity is Right for You?
It's a crazy world out there, with a lot of conflicting financial information. To make the best decision, it's important to get educated about the different types of annuities and how they work.
Fixed Annuities
If you’re like many people, you worry
about whether you’ll have enough
money to last your retirement. Fixed annuities create a guaranteed stream of income you can’t outlive. You can establish income for your lifetime.
Indexed Annuities
Throughout your working life, you've focused on saving money
for retirement. Now, you're also thinking about how to spend it. In an Indexed Annuity, when the market is expanding,
you can accumulate money tax-deferred. If there's a downturn, you're protected from market loss. When
you’re ready to take income, an Income Rider gives you the ability to create
a guaranteed “paycheck” to carry you through your retirement years.
Guaranteed Income
An optional Income Rider is available that allows you to create a
guaranteed stream of income that can last as long as your retirement. The amount you receive can increase the longer you wait to start income payments.
Growth Potential
Pursue additional growth with Interest Credits that are based in part on the performance of an external market index.
Protection from downside market risk
Your money is not directly exposed to the risks of the stock
market or individual stocks.
Tax deferral
Annuities provide the advantage of tax-deferred interest
accumulation. You don’t pay taxes on any growth until you withdraw money.
Immediate Annuities
Single Premium Immediate Annuities (SPIA) create guaranteed income for you immediately. This stream of income you
can’t outlive. You can establish immediate income guaranteed for your lifetime.
A Single Premium Immediate Annuity (SPIA) allows
you to put a lump sum of money into a contract and immediately give yourself an income you can’t outlive, guaranteed.
You can choose monthly, quarterly or annual income that allows you to have control over how often you receive the SPIA payout.
Guaranteed income
In exchange for a
single purchase payment, you receive a stream of guaranteed income that begins immediately (up to 12 months
after the date your contract is issued).
You can receive guaranteed income for life, for a specific length of time, or a combination of both, depending on the annuity option you choose.
Predictability
A SPIA provides a
reliable source of income that is not affected by fluctuations in the stock
market. At the time you purchase a
contract, you know how much income you will receive.
Tax efficiency
If you’ve already paid
taxes on the money used to purchase your annuity contract, a portion of each annuity payment will be tax-free, until the total amount of income you’ve
received equals the amount of your
single purchase payment.
Flexibility
A SPIA offers you a
certain amount of flexibility, including the ability to add an inflation protection rider that can automatically
increase income payments by your choice of one, two, three, or four percent annually.
You can also adjust for a period certain which means you can decrease or increase the
period of time you will receive income
payments. And you can select an annuity option that includes beneficiary protection for a spouse or loved one that can protect your
designated beneficiary in the event
of your death.
5 Ways an Annuity Could Work for You:
1) Self-Created Pension — A pension is a type
of retirement plan offered by companies that
provides retired employees a lifetime income on
an on-going basis. Today, many companies are not
offering pensions and only annuities can guarantee
lifetime income.
2) Supplement to Social Security — Living on
Social Security alone is difficult. Using your
fixed annuity, you can choose to receive income
payouts annually, quarterly, or monthly to help
supplement your Social Security check. This can
provide a stronger reliable income.
3) Inflation protection — Worried about future
inflation when purchasing an annuity? If
you have the income payment increase rider,
your payouts increase every year based upon the
percentage you select when you apply for your fixed
annuity or indexed annuity.
4) Increased income over other investments —
An annuity may allow for a higher
withdrawal rate than you can take from an
investment portfolio if longevity runs in your
family. SPIA and FDIA payouts are guaranteed and
calculated based on the amount contributed and the average mortality rate (the percentage of people who
die each year and at what age). The annual payout of
a SPIA and FDIA is usually between 5 and 7 percent of your premium. Can you take out 5 to 7 percent out of your investment portfolio each year and know it
will last your lifetime?
5) Buffer to investment portfolio —
Acknowledging that traditional investments
like stocks, bonds and mutual funds have good
years and bad years due to the market’s fluctuation, a fixed annuity can be used to complement your other investments. By placing some money into the fixed annuity, in a down market year you can minimize some market losses if you know you will get guaranteed income from a fixed annuity or indexed annuity.
Annuities provide
assurance against the risk that you’ll outlive your money after you retire. They give you the potential to grow your savings and create a guaranteed income stream to last a lifetime.
Annuities not to buy and potentially avoid
Avoid annuities with high and/or hidden fees and that are tied to the stock market where you could lose money, such as Variable Annuities (VA's). Most of these VA's are tied to the stock market and will go up and down in value with no guarantees on performance. Avoid annuities that don't provide guarantees.
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