Annuities:
Understand The Benefits
Could an annuity be right for you?
It’s important to compare the benefits of an annuity to the benefits of your current retirement savings accounts. Additionally, annuity benefits differ from product to product. Some products are extremely low-risk, with an emphasis on safety. Others, not so much. We mainly focus on fixed indexed annuities (FIAs) as they can provide a certain amount of safety that other annuities, and qualified retirement accounts, may not be able to.
Annuity Benefits
Of course, everyone’s individual situation is different. Everyone has different goals and needs in retirement. Perhaps an FIA is not the right option for you. No retirement strategy is “one-size-fits-all.”
However, we can look at your situation to determine suitability. For example: How much of your savings are available for retirement? You may need to have a certain amount of money available for easy access.
For example, what if an emergency comes up? Are you ready? Or, if you want to use some money now, can you?
Also, where will your money go? What types of things will you need to spend it on? Some people have a set income figure in mind. But, some retirees may forget to include things like taxes and inflation into their income number. However, these are outside factors that could impact your retirement. Certain annuity benefits, such as lifetime income benefits, may help. Some FIAs offer protection of your money as well as income you cannot outlive.
Annuity Benefits and Options
When you understand something, you can make good decisions. Indeed, this is very true when it comes to retirement options. When we talk about fixed index annuity benefits, we can include three primary benefits:
First, if you want to keep your money safe from market loss, an FIA may make sense. This is because an FIA is a contract with an insurance company. Therefore, the insurance company may guarantee* your principal with its claims-paying ability.
Second, an FIA may offer a reasonable rate of return.** Unlike some other options, and FIA’s principal balance does not drop when the stock market does. Instead, this product has a link to a market index or multiple indexes. Therefore, some FIAs give you the chance to see a reasonable rate of return** when the index is up, yet not lose your principal when the index is down.
Third, some annuities provide a straight-forward approach to retirement. Remember, you don’t have to track market rends with and FIA. Instead, your account gets credit of your index(s) go up past a certain level. However, if they drop below a certain level, you don’t lose your principle.
What Are The Benefits Of An Annuity Contract?
Again, a fixed index annuity (FIA) is an agreement between you and the insurance company. You give them money into your policy. Then, they agree to keep that money safe from loss in the market. Also, there is a period where the insurance company gives your money time to grow. During this time you usually may not take your money out. However, there may be exceptions. Usually, this waiting period is between 5-10 years. But, it can be longer as well. Sometimes this is called the accumulation phase of the FIA agreement. Then, when it is time, you may be able to take income from your FIA. This may take the form of retirement income payments, if you choose.
Other Contract Terms May Include:
-
Potential income riders
(for increasing income in the future) - Death benefit options
- Surrender period
- How long the potential growth period should be
- Caps on potential index interest
- Ways you may or may not use your annuity payments
- What a fixed index annuity is and is not
- Details about terms and conditions
Fixed Index Annuity:
Does It Rely On The Stock Market?
An FIA has the benefit of offering protection on your principal. In other words, your money does not suffer loss if the market goes down. Instead, if the potential index interest is above a certain amount, you may see growth in your annuity. Then, if the index(s) drop below a certain point, you’re annuity has a “floor.” Specifically, your money cannot go belong a certain amount due to the index dropping. Of course, this also relies on the claims paying ability of the insurance company. Hence, its important to learn as much as you can before purchasing an FIA. You want to make sure your choice is the right one for you.
Ask Us About Different Annuities Options For You
We’re here to help every step of the way.
