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Today’s retirement is so different from what prior generations experienced. Our potential to live longer has increased significantly and that means our money must also last a lifetime.
An annuity is a unique tax-deferred financial vehicle in its ability to provide guaranteed lifetime income and a legacy. It may be a good way for you to plan for a long and enjoyable retirement.
Like all financial products, annuities have associated fees or charges. These can include administrative fees, management fees, mortality and expense risk charges, sales charges, and withdrawal charges. Optional living benefits and death benefits may also be available for an additional cost.
Since the guarantee provided by an annuity is only as strong as the insurance company that issues it, financial strength and ratings are very important. You’ll want to make sure that the company is financially secure. Rating agencies such as A.M. Best, Standard & Poor’s, and Moody’s all rate the financial strength of insurance companies.*
*Ratings apply to fixed accounts, death benefits, and annuity income payment guarantees.
Most annuities have a feature that provides protection for your beneficiaries, and with all annuities you can avoid probate. Upon your death, your designated beneficiaries will receive the greater of two values:
With a variable annuity, you may also be able to elect extra death benefits for an additional cost
When you are ready to start withdrawing income from your deferred annuity, you can:
There is no additional tax-deferral benefit for contracts purchased in an IRA, since these plans are already afforded tax-deferred status. Thus, an annuity should be purchased in an IRA only if you value some of the other features of the annuity and are willing to incur any additional costs associated with the annuity to receive such benefits.
When purchasing an annuity, you can choose a payment method—whether to fund it with a single payment or multiple payments
Annuities are also categorized based on when you take income, immediate or deferred, and how you make payments, single premium or flexible premium.
A fixed annuity is attractive when you are interested in safety and preserving money, rather than taking on market risk.
Some annuities also offer principal guarantees and can provide guaranteed income for life
What is an annuity? Annuities are long-term financial vehicles that allow you to accumulate money tax deferred for retirement. Annuities also allow you to create a steady stream of income to live on in retirement.
An annuity is basically a contract between you and an insurance company whereby the insurance company makes a series of income payments to you in exchange for premiums you have paid. While the purpose of life insurance is primarily to protect your beneficiaries, an annuity is designed to help you accumulate money for your future income needs and to protect you by providing you with an income stream that you cannot outlive.
Types of Annuities – general overview