Annuities

What are Annuities?

Annuities are a unique investment tool used by many to help maintain security and peace of mind during your retirement years. Essentially, purchasing an annuity will provide the insured with an income stream for life after you retire.

Why are they Important?

Guaranteed Income For Life
- Annuities guarantee the insured a monthly paycheck for the rest of their life, similar to a social security check, once the insured undergoes retirement. Your monthly payment amount is the balance of your annuity, principal and interest is amortized over the period from when you first begin taking distributions until you turn a certain age specified to your unique policy. Even if you outlive your life expectancy, the checks keep coming. In regards to life expectancy, annuities can be very profitable in the long run for those with fortunate longevity.

Different Types of Annuities
- Fixed Annuity
  - Fixed annuities provide the insured with a guaranteed rate of return. Fixed annuities have no tie to the economy or any market indicators so no matter how the stock market or economy is doing the rate of return for fixed annuities will never fluctuate. Fixed annuities are hardly classified as securities, however, the trade off with a fixed annuity is accepting slower growth rates for incurring interest.
- Variable Annuity
  - Variable annuities are tied to mutual funds and other market based securities and pay interest rates based on the security itself. Over the long term, Variable annuities provide much larger growth than fixed annuities do.

Tax Deferment
- Annuities offer tax deferments during the accumulation phase of the policy. This is saying that you are not responsible for paying taxes on the interest your annuity earns until you begin receiving distributions from that annuity. By compounding interest you are able to make more money over time when undergoing tax deferment as opposed to surrendering much of your gains to the government each year.