Annuities
Understanding The Basics
You Might be Asking Yourself: What Is An Annuity?
An annuity could be a good source of retirement income. Annuities provide retirees with the option of fixed regular payments. So, how does it work, utilizing annuities as a source of retirement income? Let’s first discuss what an annuity is.
Different Types of Annuities
The different types of annuities include fixed indexed annuities, (or FIAs) fixed annuities, and variable annuities.
A fixed annuity can protect your money, but has a fixed interest rate. The rate is usually lower than the rate you could receive from an FIA or variable annuity. A variable annuity, meanwhile, comes with higher risk. The rate of a variable annuity is determined by the stock market. As a result, your principal balance is at risk in the event of a market downturn.
FIAs, on the other hand, aren’t invested in the stock market. An FIA is a contract with an insurance company, that generates interest through an index. An extra benefit of an FIA is how the issuing insurance company protects your retirement savings. This keeps your hard-earned money safe. Additionally, FIAs allow for a reasonable rate of return**.
What is annuity income?
Annuity income is a way to pay for your lifestyle in retirement. If you choose an FIA, this income could last you the rest of your life.
Misconceptions About Annuities
You may have heard some professionals say annuities are bad. Why do they say this? For one thing, it’s important to keep in mind that not all annuities are the same. Some annuities are just as risky as investing in the stock market. A variable annuity puts your principal at risk. When considering a financial retirement strategy, it’s important to think about your risk tolerance. Some types of annuities, however, like FIAs, can provide protection of principal as well as a reasonable rate of return**.
Annuities Then Vs Annuities Now
Retirees didn’t always have this many annuity options available. Previously, you typically had to choose between safety of principal and a reasonable rate of return**. Having only one of these benefits isn’t really beneficial to retirees. Within the last few years, the annuity industry has changed. There are now annuity products that can offer both of these benefits. In addition, you can choose from extra benefits such as income riders and various beneficiary options.
Red Line Vs Green Line
Some people don’t mind the ups and downs of the stock market (the red line.) Most people, however, prefer to keep their principal protected (the green line.) You should ensure you don’t run out of money, regardless of what happens in the market.
Annuity Resources
Benefits of Annuities
An FIA can provide you with a degree of protection that could make you more confident in your retirement strategy.
Indexed Interest Potential
If the market rises, you'll be able to earn interest. The insurance company that issues the FIA is required to protect your money.
Protection Benefits
Annuities come with several benefits. One main advantage of guaranteed income annuities is that they provide income for life.
Who's Who in an FIA?
An indexed annuity contract typically involves four parties: The insurance company, contract owner, annuitant and beneficiaries.
Tax Deferral
If you retire early, how are annuities taxed? You may receive a bonus tax benefit depending on your situation.
Contact Us
Consider all your options when choosing annuities for retirement. Our team can help you learn your options and make choices.
Get Educated About Annuities
With so many annuity options to pick from, how do you determine which choice is right for you? Fraga Financial can help. We prioritize educating clients on their retirement options, allowing them to make a decision they can feel confident in.
Reach out to us to schedule a one-on-one, no-cost, no-obligation meeting. Alternatively, you could contact us to reserve a spot at one of our educational events. Call us today if you’re interested in learning more about what an annuity is and how you can utilize it as a retirement income strategy.
