A Good Plan Gives You Peace of Mind

Annuities are a popular financial product that offer a unique combination of income generation, tax benefits, and risk management. But what exactly makes annuities distinct from other investment options? Here are the key features of annuities.

Income for Life

One of the defining features of annuities is their ability to provide guaranteed income for life. Once the annuity contract is annuitized, the annuitant receives regular payments for a predetermined period or for the remainder of their life. This feature provides a safety net for individuals who worry about outliving their savings.

Variety of Annuity Types

Annuities come in various forms, each designed to cater to specific financial goals and risk tolerance. Immediate annuities start payments shortly after the initial investment, making them suitable for those nearing or in retirement. Deferred annuities accumulate earnings over time and start payments later, ideal for those planning for future retirement income. 

Additionally, annuities can be fixed (guaranteeing a certain return) or variable (where returns depend on the performance of underlying investments).

Tax-Deferred Growth

Annuities offer tax-deferred growth, meaning the earnings aren't taxed until withdrawal. This allows the investment to grow faster without being eroded by taxes, providing a significant advantage over other taxable investments.

Death Benefits

Many annuity contracts include death benefits, which ensure that if the annuitant dies before annuitization, a designated beneficiary will receive a specified amount. This feature can be seen as a form of insurance, offering peace of mind that the annuitant's investment won't be lost.

Flexibility in Payouts

Annuities offer flexibility in how and when you receive payouts. You can opt for a lump sum payment, regular income for a set period, or a lifelong income stream. This flexibility allows you to tailor your annuity to fit your specific financial needs and retirement goals.

Surrender Period and Fees

It's crucial to note that annuities often have a surrender period, during which a withdrawal or cancellation will incur a surrender charge. These fees can be steep in the early years of the annuity contract, so annuities are typically recommended for long-term financial planning.

Potential for Principal Protection

For individuals concerned about safeguarding their capital in uncertain economic times, certain types of annuities offer an appealing feature: principal protection.

With fixed annuities and fixed indexed annuities, the principal investment is protected from market downturns, which can provide peace of mind to more conservative investors. In a fixed annuity, both the rate of return and the payout amounts are guaranteed. Meanwhile, fixed-indexed annuities offer a guaranteed minimum return, but also the potential for higher returns based on the performance of a specific market index.

For more information on annuities, contact a professional near you.