Understanding Annuities for Retirement


Annuities for Retirement

An annuity is a financial product that guarantees retirement income that never runs out. There are different types of annuities including fixed and variable.  Different types of annuities offer different features that may help you reach your financial goals. Our goal is to provide you with information that will help you decide which is best for you.

An Overview Of Annuities

Let’s consider fixed index annuities (FIAs) as an example. FIAs track the performance of an index, such as the S&P 500. These funds have some of the benefits of index funds in the stock market, but they are not directly linked to the market. This is the case since FIAs are not investments, but insurance policies. Additionally, as an insurance product, annuity rates and earnings are guaranteed. As a result, fixed index annuities are protected against principal loss even if the market falls. This allows you to earn a reasonable return** while still keeping your money safe from loss. 

Fixed index annuities have a higher potential for interest growth than variable annuities. Fixed index annuities are also less risky than variable annuities.

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Phases of Annuities

In annuity contracts, there are two stages - accumulation and distribution. You accumulate retirement funds during the accumulation phase. When you retire, you begin receiving income from your annuity during the distribution phase. 

Tax-Deferred Annuities

A tax-deferred annuity allows you to accumulate money for retirement (cash value). This money can then be converted to lifetime income. Tax-deferred annuities include long-term care annuities (LTC) and fixed index annuities (FIAs).  In the accumulation phase, FIAs qualify for a tax benefit. You do not pay taxes during this phase. Your taxes are only due when you make a withdrawal. Fixed index annuities generally tax ordinary income, not capital gains. When you reduce your liabilities in retirement, you can earn more and increase your income. Call for a one-on-one meeting.

Long-term care annuities help pay for long-term care without consuming retirement income. LTC annuities provide coverage for nursing homes, assisted living facilities, home health care, and chronic illnesses. Learn more about LTC policies.

Deferred Annuities vs. IRAs, and 401(k)s

Fixed index annuities offer greater flexibility than an IRA or 401(k) and have fewer restrictions. 

  1. There are no contribution limits for FIAs. 
  2. You can also roll over certain 401(k)s and IRAs into index annuities.
  3. Your earnings compound tax-free each year.
  4. Tax-free contributions allow you to keep all the money you earn.
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Indexed Interest Potential of an FIA

With a fixed index annuity, you have the option of allocating its value to one or more indexes. Allocating to different indexes give you more options for interest rates. Insurance companies track your selected index using crediting methods. Indexed interest is calculated after each contract year.

Factors That Affect The Potential Interest Rate

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Find Out More About Annuities For Retirement

Make sure that the retirement annuities you’re considering meet your needs. We can help you determine which one is right for you. Schedule a meeting with us at no cost to you.

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