An annuity allows a customer to deposit money (premiums) with an insurance company that can earn interest and grow on a tax-deferred basis with the agreement that the insurance company will then provide a series of payments back to the customer at regular intervals.
There are generally two different types of annuities
Available to purchase using a single lump sum, or with flexible premiums over time. When it comes time to take income from your deferred annuity, you will have many options available to meet your needs.
Immediate – Provides income payments that normally begin within a year after the premium is paid. Deferred – Provide income payments that begin later, often after many years. Deferred annuities are designed for long-term savings purposes.
Accumulation Without Risk – Peace of mind that their principal won’t go down! FIAs can offer a balance + security against the VERY turbulent markets. When the index is performing well, you are able to capture the upside and will see interest earnings somewhere close to the cap. Should the index perform poorly, the downside is hedged with the guarantees built in. If retirement is about limiting risk, one of the BEST ways to alleviate the market risk is with a FIA.
Tax Deferral – Spring is a good time of year to think about your taxes. Do you have a plan for taxes in retirement? You’d be surprised how many people don’t take taxes into account. With an FIA, while there usually is income tax paid when withdrawals are made, you can have the benefit of tax-deferred earnings, which will allow you to earn interest on the principal, interest on the interest, and interest on the tax savings!
Peace of Mind – Having a secure source of income will add peace of mind. The GUARANTEED stream of income offered by Fixed Indexed Annuities acts as a steady paycheck, though there can be early withdrawal charges for certain withdrawals before the end of the surrender charge period, so that it’s easier to plan for purchases and costs in retirement, which will help you sleep comfortably at night.