Broker Check

Who Are Annuities For?

February 17, 2022

Before we discuss who would best benefit from using annuities, first we will go over what annuities are. Insurance companies issue annuities as a form of insurance to allow retirees to transfer the risk of losing money for retirement income or in the stock market from themselves back to the insurance company. Taxes are not paid on income and investment gains until money is withdrawn.

There are three types of annuities:

Variable, Fixed Indexed, and Fixed Rate

A variable annuity will let you invest in the stock market, while a fixed rate annuity will have a fixed interest rate. The fixed index annuity will have a proprietary crediting method that is tied with an index. When using fixed rate and fixed index annuities, there are guarantees against principal loss whereas the variable annuity will have a degree of downside risk like most other investment.

Now we have shared what an annuity is and some of the benefits they offer. Annuities should be considered by individuals who are approaching retirement, who want to increase their retirement income, keeping some money out of the market or be protected from downside risk.

We hope this information will help give you a better understanding of annuities and if they are best for you. Please schedule a time for more information that may benefit you.

*Annuities are long-term investments suitable for retirement funding and are subject to market fluctuations and investment risk, including the possibility of loss of principal. Annuities generally contain fees and charges which include, but are not limited to, mortality and expense risk charges, sales and surrender charges, administrative fees, charges for optional benefits and riders, and annual contract fees. Annuity guarantees, including guarantees associated with benefit riders are subject to the claims-paying ability of the insurance company. Surrender charges may apply if money is withdrawn before the end of the contract. All withdrawals of tax-deferred earnings are subject to current income tax, and, if made prior to age 59½, may also be subject to a 10% federal income tax penalty. Additionally, if purchased within a qualified plan, an annuity will provide no further tax deferral features. The contract, when redeemed, may be worth more or less than the total amount invested. All other benefits are available for an additional cost. It is important to weigh the costs against the benefits when adding such options to an annuity contract.