What is an annuity?
You know you want to retire, and you’ve probably started saving for it. Maybe you’re almost there and think you’ve got it all under control. But what would happen if you outlast the funds you’ve saved for retirement? Many people haven’t even considered it, but an annuity could be the answer. Annuities are products sold by insurance companies that can guarantee an income for you in your retirement. Many annuities can even pay you a regular payment for the rest of your life!
How do annuities work?
When you purchase an annuity, you make a payment to the insurance company, and the insurance company builds interest on that money and sends you a check at regular intervals for the duration of the contract, which could be years or even until you pass away. Your interest is tax-deferred, so you won’t even have to pay taxes on it until you start receiving payments from the annuity.
What are the different types of annuities?
Annuities can look very confusing, but don’t worry! There are only a few distinctions you really need to worry about right now: when it pays out and how your payment is determined.
An immediate annuity begins to pay out as soon as you make your contribution. A deferred annuity will start building up interest as soon as you begin contributing, but it won’t start to pay out until a later date you choose.
A fixed annuity will guarantee you a specific payment, and you will get exactly that payment every time. An indexed annuity is tied to an index like the S&P 500. These annuities will usually have a minimum disbursement, but you can make more if the market is doing well. A variable annuity is invested in the market, and your payment will vary based on how those investments are doing.
Why should I get an annuity?
An annuity is first and foremost a great way to ensure you don’t outlive your savings. It protects your money because you can never lose your entire nest egg at once. It can supplement social security and pension payments to make sure you live as comfortably as possible for as long as possible.
An annuity is a great option for many people, especially when purchased from an agent you can trust. Consider an annuity if you:
- Are close to retirement age
- Want a consistent income over a period of time
- Don’t want to have to worry about investing or managing a large sum of money yourself
- Have maxed out your other investment options, like your annual 401k and IRA contributions
Are annuities too good to be true?
In the past, annuities have been considered “too good to be true” because they were sold by insurance agents who would say anything and minimize the downside just to get a commission. We don’t do what we do just for commissions. We do it because we’re passionate about helping people manage their money and make good insurance decisions. We’ll help you figure out if an annuity is really the right product for you, and we’ll work with you every step of the way to plan your retirement.
Schedule a meeting with our team to discuss your retirement options and you won’t find a slick, commission-hungry agent looking for a quick fix or an easy sell. You’ll find a knowledgeable expert who loves what he does and will help you make the right decisions for your money, your retirement, your life.