Annuities
Understand The Basics
Understand Annuity Basics
Are you not sure what an annuity is? You aren't alone.
Many people aren’t aware of how these products work and the benefits they can come with. We can help. We’re here to teach you annuity basics, in order to help you decide if an annuity may be right for you. If you have any questions, you can give us a call.
Not All Annuities Are the Same
Annuities differ quite a bit, but they do have a few basic things in common.
Every annuity has some kind of option for receiving payments or income. While not all annuity owners use this benefit, many do. Another thing all annuities have in common, is that they’re all a contract between the annuity owner and an insurance company. It’s the terms of the contract and the benefits it entails that make the difference between different annuity types.
Annuity Basics: Different Types of Annuities
Not all annuity products are the same, as we said. There are three main types of annuities, which, themselves, have variety within them depending on the individual product. The three main types of annuities are fixed annuities, variable annuities, and fixed indexed annuities, or FIAs.
With a fixed annuity, policyholders get a fixed interest rate on their money. This option may provide regular rates of return. However, there is no potential to increase your rate. Variable annuities, meanwhile, allow for potential growth. But, your money is at risk of loss in the event of a stock market downturn. Finally, fixed indexed annuities…
Fixed Indexed Annuities
An FIA is very different from a variable or fixed annuity. An FIA is, in a sense, the “best of both worlds.” Like a fixed annuity, it provides protection of principal when the market is down. However, like a variable annuity, it allows for potentially higher rates when the market is up. Protection and reasonable rates of return,** among other possible benefits, all from one product.
Essentially, with an FIA, you contribute a certain amount of money, which the issuing insurance company is required to keep safe in a reserve. Then, the accumulation phase begins, your money grows based on the performance of a stock market index or indexes, while still being kept safe. When this phase ends, the distribution phase starts, during which you can receive income from the FIA. Additionally, an FIA allows for tax deferral, and if you select an income rider, you may be able to use it to compensate for inflation. You can learn more about all of these benefits by reaching out to us or attending an educational seminar event.
Are There Any Downsides to an FIA?
Like any retirement option, an FIA isn’t for everyone: No financial vehicle is “one-size-fits-all,” since everyone has different priorities during retirement. But, if your main priority is safety, and you also value getting reasonable rates of return,** all while keeping things simple, an FIA may very well be the product for you.
Reach out to us to learn more about annuity basics
Or, you can attend one of our no-cost educational seminars, which come with a complimentary gourmet meal.