Our Services: Annuities

Annuity Benefits

An annuity is, in simple terms, defined as an agreement with an organization to receive money on a set schedule. An annuity product can provide you with a string of guaranteed* payments, possibly for the rest of your life.

There are, however, some risks associated with annuities, depending on the type you have. You may have heard that an annuity product puts your money at risk. But the source that said so was probably referring to variable annuities. A variable annuity invests your money directly in the stock market. A fixed indexed annuity (FIA) is different. An FIA comes with a guarantee* of safety on your principal. Based on your situation, we’d likely recommend an FIA, given that safety is our top priority when helping clients. However, safety is just one of many fixed indexed annuity benefits.

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Fixed Indexed Annuity Benefits

A fixed indexed annuity has the benefit of keeping your money safe. This is because it doesn’t invest your money in stocks. However, it does link to an external market index, allowing your interest rate to rise when the market is doing well. But no money in your FIA is lost when the market suffers a downturn. Additionally, it’s essential to note that an annuity is a product, not a retirement plan account or an investment. It comes with no risk of loss,* and an FIA comes with certain tax benefits compared to other options like 4o1(k)s or IRAs.

You may be able to “roll over” the money in your current retirement plan account directly into an FIA instead. And, dependant on the individual contract, there may be a way to compensate for inflation built into your FIA. This is important, given how much inflation impacts your retirement.

An annuity also has no contribution limit, making it the perfect option if you’ve exhausted your employer-issued retirement accounts and want a safe space to store more money.

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Annuity Phases

A fixed indexed annuity contract has two main stages: Accumulation and distribution.

Your money is protected*, and it grows tax-deferred. However, you must give it time to grow: You cannot withdraw money from your FIA until the date specified in your contract. The time before you withdraw money is known as the accumulation phase. The distribution stage begins when you start taking payments. You can specify how often you’d like to receive payments: Yearly, quarterly, etc. You also have choices about how and when you get your money: You may even choose to wait, letting your money grow more before withdrawing the money. FIAs do not include required minimum distributions (RMDs).

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Annuity Tax Benefits

Your money grows tax-deferred during the first stage of your annuity contract. Taxes are only paid when you withdraw the money; even then, only ordinary income taxes are paid. An annuity product may help you if you wish to reduce the burden of taxes on your retirement. And, assuming you are under age 59 1/2 and have received a large lump sum from a 401(k) from a former employer as part of an early retirement or severance package. In this scenario, you’d have to pay hefty taxes, unless you “roll over” the money into an annuity instead. Of course, when it comes to tax-related questions, you should always consult a qualified tax advisor about them.

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Is an annuity the right financial vehicle for you? It all depends on your financial situation and retirement goals/needs. Reach out to us for a one-on-one meeting to talk about your situation. Or, if you’d like to learn more about these products and the various things that impact your retirement, all at no cost, join us for a seminar event. You’ll learn important information at these events and enjoy a complimentary gourmet dinner. Reach out to us if you’d be interested in attending.

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