An annuity is a contract between an individual and an insurance company.  The individual makes a lump-sum payment or a series of payment to the insurance company, and in return, the insurer promises to make regular payments back to the individual at a later date.

There are several types of annuities, each serving different financial goals.  The various annuities are:

Immediate Annuity: This starts paying out immediately after the initial lump sum is paid.  They are suitable for individuals seeking an immediate and guaranteed income stream.

Deferred Annuity: This delays payments until a future date, allowing the initial investment to grow over time.  Deferred annuities can be a smart choice for those planning for retirement.

Fixed Annuity: This offers a guaranteed interest rate for a specified period, providing a predictable income stream.  These are often seen as a conservative option.

Variable Annuity: This allows the investor to choose from a selection of investment options, such as stocks and bonds.  The payout can vary based on the performance of these investments.

Indexed Annuity: This links returns to a stock market index, providing the potential for higher returns compared to fixed annuities, with some downside protection (e.g., market volatility).

Benefits of Annuities:

• Steady Income: Annuities can offer a reliable source of income, either for a set number of years or for the rest of your life.

• Tax Advantages: Some annuities provide tax advantage, allowing you to defer taxes until you start receiving payouts.

• Diversification: For those looking to diversify their retirement portfolio, annuities can be a valuable addition, especially for risk-averse investors.

• Longevity Protection: Annuities can help protect against the risk of outliving your savings, providing financial security in retirement.

Considerations:

Fees, surrender charges, and the specific terms of the contract can vary, so it is important to review and understand the terms before committing.

Annuities can be a valuable investment vehicle for securing a stable income stream in retirement.  As with any financial decision, it is recommended to consult with a financial advisor to determine if an annuity fits with your overall financial goal.  Understanding the nuances of annuities empowers investors and retirees to make informed decisions, ensuring a more secure and comfortable financial future.

Ready to learn more or see if an annuity fits your financial goals?  Contact us to explore your options and get a personalized illustration.