Are you beginning your retirement planning or ready to roll over your current 401K?
You’ll want a safe financial instrument that still provides interest earned. An annuity may be the perfect solution to bridge your income gap.
Annuities can provide a guaranteed, secure, stream of income. Like pensions, they supplement social security and provide financial security now or in the future.
It’s important to know all your options. Annuities can be customized to meet your individual needs. They may last the rest of your lifetime or only a set period of time.
Annuities can grow with little or no risk of loss. And they are considered by the IRS as a tax-free direct transfer.
Learn about annuities
There are many kinds of annuities, but they usually fit into a few basic categories:
Fixed Annuities (sometimes called Traditional Fixed Annuities) provide a guaranteed interest rate as well as an actual interest rate. The actual rate may vary over the life of the annuity but will not fall below the guaranteed minimum interest rate (GMIR).
No matter what happens in the market, or if interest rates change, the policy will continue to grow at the declared rate. There are Multi-Year Guaranteed Annuities (MYGA) that provide a fixed interest rate over longer periods of time.
A Fixed Indexed Annuity (FIA) is sometimes called an Equity-Indexed Annuity. It gathers interest based on the performance of a specific stock market index, like the Dow Jones Industrial Average or the Standard & Poors 500.
Some FIAs include a guaranteed rate of return or secure a base rate of return. While an FIA is tied to the performance of a stock index, it does not directly participate in the stock market. FIAs are protected against negative index movements. Within each FIA, there will be many choices for capturing and crediting interest rates.
Single Premium Immediate Annuities (SPIA) are purchased with a lump sum of money. They do not have an accumulation or tax-deferral period.
Benefits are triggered within a year of purchase. The payment amounts you receive from a SPIA depend on the amount used to purchase the annuity, your life expectancy, and your gender, and other factors.
Deferred Income Annuities are often called “longevity insurance” or a “longevity annuity.” They combine elements of Deferred Fixed Annuities and Single Premium Immediate Annuities. Like SPIAs, Deferred Income Annuities (DIA) are purchased with a lump sum. However, benefits can be delayed for a set period of time. This lets the contract value grow, increasing payment amounts when distributed.
And it may be possible to add to the initial purchase amount and increase benefits. DIAs typically have a Lifetime Income Rider built into the product.
Variable Annuities share many of the features of fixed and fixed indexed annuities. But Variable Annuities are directly exposed to the stock market. The carrier still assures a minimum payment, thought the return varies with the performance of underlying securities.