Here are some answers to retirement questions we often get pertaining to annuities. Can’t find what you’re looking for? Schedule a consultation with one of our retirement specialists.
An annuity is a financial product offered by insurance companies that provides a stream of income, often used for retirement.
You pay a lump sum or series of payments, and the insurer promises to pay you regular income either immediately or in the future.
Yes, annuities are considered safe since they are backed by the issuing insurance company. However, it’s essential to choose a reputable insurer.
The main types are fixed, variable, indexed, immediate, and deferred annuities. Each type serves different financial goals.
People looking for a stable income in retirement, tax-deferred growth, or protection from outliving their savings.
Immediate annuities: Payments start within 30 days to a year.
Deferred annuities: Payments begin at a future date you choose.
Withdrawals of earnings are taxed as income.
Contributions made with after-tax dollars are not taxed again.
Yes, but early withdrawals (before age 59½) may incur surrender charges and a 10% IRS penalty on the earnings. Withdrawals after 59½ may still incur surrender charges.
Most annuities allow you to designate beneficiaries who may receive the remaining value or income.
Fixed annuities grow at a guaranteed interest rate.
Variable annuities grow based on investments.
Indexed annuities grow based on a market index’s performance, with limits.
Yes, the growth inside an annuity is tax-deferred until you withdraw the funds.
Fixed and immediate annuities protect your principal completely
Index Annuities carry a small amount of risk but offer downside protection to protect your principal.
Variable annuities carry the most risk of any annuity product and may not guarantee your principal.
Fees vary by type of annuity but in many cases, an annuity will not have a fee. Those annuities that carry a fee typically have an attached rider or offer higher payout options. In addition to fees, you will want to consider management fees of the insurance company, rider costs, surrender charges, and mortality/expense risk charges for variable annuities.
The minimum premiums for annuities are among the most flexible retirement options and use your own money. Some annuities (like fixed or immediate annuities) have no or minimal fees, while variable annuities can have higher fees. Annuities should not be something you are charged a management fee in which to invest your money.
Yes, many annuities offer optional riders for lifetime income, long-term care benefits, or death benefits, allowing you to tailor the contract to your needs.
Yes, options include payments for life, a set number of years, or both (life with a period certain).
Some annuities offer inflation protection riders that adjust payouts over time, but these usually come at an extra cost.
Indexed annuities earn interest based on a market index’s performance, with a cap or participation rate that limits growth. They also protect your principal from losses.
Annuities provide guaranteed income and tax deferral but don’t have annual contribution limits like IRAs or 401(k)s.
Annuities are ideal for those seeking guaranteed income, tax advantages, or principal protection. They may not suit investors who prioritize liquidity or high-growth potential.
Schedule a consultation with us and we can help answer any questions you have.
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