What Exactly Is An Annuity?
According to Investopedia, an annuity is a financial product that pays out a fixed stream of payments to an individual. These financial products are primarily used as an income stream for retirees. Annuities are created and sold by financial institutions, which accept and invest funds from individuals. Upon annuitization, the holding institution will issue a stream of payments at a later point in time.
You can still find an annuity that works that way but this type of annuity is used less often because there are new and improved annuities that can meet the many different needs that exist today. That is basically what was used to fund pensions back in the day. The deal is that things have changed and annuities can provide a safe way to grow your retirement savings while having an opportunity to earn more than a CD or the money in a brokerage account that is sitting on the side. Annuities are longer term than CD’s and the truth is the longer you commit to leaving your money in the account the better terms you can get, that is the same for a bank CD. If you decide to break those terms there is a surrender fee or penalty on the funds you take out. However, most annuities allow for a 10% withdrawal of the annuity balance each year without any penalty what so ever.
What Types Of Annuities Are There?
There are two basic types of annuities…
Fixed Annuities
These annuities are called fixed because if you follow the terms of the contract, your money is guaranteed and you cannot lose principle.
Variable Annuities
These annuities have the savings invested in the market so your balance will go up and down as it would in a brokerage account which of course means principle is at risk. Typically there are less investment choices in a variable annuity then there would be in a brokerage account. That said there are variable annuities that do have additional benefits addressing such things as retirement income.
What Can A Fixed Annuity Do For You?
- It can protect your savings from losses while allowing you to participate in the upside of the market.
- An annuity is the only financial product that can provide by contract a guaranteed income for life.
- Certain annuities will provide extra money if the need arises for skilled nursing home care or in-home health care.
- Some can provide accelerated growth for income.
- While others can provide for an increased death benefit.
If you have concern for your savings, if you have goals and needs that you plan to use your savings for then there might be an annuity solution to address those needs. Click the button below, contact us and let us see if we can help!