An annuity is an insurance or
that is sold by insurance companies that grows on a tax-deferred basis and it can create an income stream that you cannot outlive. Annuities are very popular for people who want a steady stream of income now or in the future.
Indexed Annuities are similar to fixed annuities in that you will receive a minimum guarantee in addition to participating in the some of the index gains but with none of the losses.
Variable Annuities allow you to choose from many subaccounts like a mutual fund and a guarantee account. These annuities are securities and are subject to market fluctuations and losses.
Which Annuity is Best for me?
an annuity, it is best to seek
from an experienced annuity insurance agent. There are many agents who can help find the
for your situation. A qualified agent will be able to shop and compare annuities and he will be able to supply you with proper
When you start
to purchase an annuity, you should always check the ratings
of the insurance company you will be placing your money with. I know it sounds simple, but most people just “trust” their agent. You should always place your money with at least an “A” rated insurance carrier.
How to Fund an Annuity
There are basically two ways to fund an annuity. You can purchase an annuity by simply writing a check made payable to the insurance company or the most popular form of funding an annuity, is by rolling money from another investment or savings vehicle. For example, you can roll money from a 401k account or IRA to an annuity. With
single payment annuities
, you roll your value into a new annuity contract.
Here’s how they work:
You give or roll over money/premium to an insurance company. If you purchase a
, the money will continue to grow tax deferred. If you are purchasing an
, the insurance company will begin making payments to you immediately. Distributions from an annuity can be monthly, quarterly, and annually.
Size of payments:
The size of the payment you receive are determined by a few factors.
Your age when you take the payments. The older you are the more money you will receive.
Length of payment. If you opt for lifetime your payments will be lower due to the company being on the hook for the rest of your life verses a payment for 10 years only.
The interest rate environment. A lower interest rate environment at the time you buy the annuity will determine your rate now even if you start to take an income 10 months from the day you bought it. It works both ways and you can purchase cost of living increases.
"One of eight wonders of the world: tax-deferred compound interest" Albert Einstein
Interest on your Interest
Interest on money that you would have paid in taxes.
Premium Bonus of 5% to 10% guaranteed
Long Term Care Benefits
Annual minimum guarantees
Guarantees against loss and risk
Estate Planning (Probate Avoidance)
After reading this webpage and reviewing the rest of this site, you should have a better understanding of what are annuities, types, and benefits associated with annuities. If someone were to say, what are annuities? You will at least know the basics of what they are and how they work.
Annuities can be very good retirement planning tools and should be considered in your overall portfolio. You should research the health and ratings of the carrier you go with as well as the length of years that fits your needs.