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.
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.
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
There may be a maximum rate of interest on some fixed index annuities. Usually, the rate is capped for one month or one year. The index rate will not be applied if your selected index exceeds the cap. In this case, a cap rate is applied.
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.