Who has an annuity? Americans with jobs that are risky; race car drivers, firefighters, and police officers take on risks at work, but many will not risk their retirement security.
What is an annuity?
Annuity products are evolving first and foremost to meet the demands of people entering retirement. The most important thing you need to know about an annuity is that annuities are long-term insurance products that provide a guaranteed income. The benefit of having an annuity can be an important part of retirement planning, strategy, and providing direction to people by helping them with important optional benefits that will help them protect their financial future.
Annuities provide a steady stream of payments at regular intervals and because their earnings grow tax-free until you withdraw funds, they are a common retirement income. Annuities also offer a death benefit that protects your original investment for your benefit. Most annuities have a tax deferred nature and they also fill the gap between other sources of guaranteed and stable retirement income-such as Social Security or pensions.
What are the 2 stages of an annuity?
There are two stages in the life of an annuity:
- Accumulation phase-you pay premiums into the annuity either with a lump sum or a specific period-of-time, depending on the type of annuity.
- Distribution phase-you will receive monthly, quarterly, or annual payments according to the terms of the annuity contract.
Annuities are tax deferred, and that means you will not have to pay income tax as the dollars grow. They are intended for retirement investing so withdrawals taken from the annuity before 59 and a half may be subject to a 10% IRS tax penalty.
What are the benefits of an annuity?
One of the advantages of owning an annuity is they are offered by life insurance companies and can offer protection and guarantees not generally found in other products. All the money you invest compounds year after year without any tax bill. When an annuity is cashed out you can choose to take a lump sum payment or many people that retire will set up guaranteed payments for a specific length of time or for the rest of their life which provides a steady stream of income. The annuity serves as a complement to other sources of retirement income.
Deferred and immediate Annuities
Annuities can be immediate or deferred. Immediate annuities begin paying immediately after the annuitant deposits a lump sum. Deferred income annuities do not begin paying out after the initial investment. Instead, clients specifically decide at what age they would like to begin receiving payments from the insurance company. Annuities are appropriate financial products for people who are looking for guaranteed retirement income.
The guarantees annuities provide rely on the financial strength of the insurance company issuing the annuity. They can ensure the retirement income you have is protected even when there are downturns in the market. So, no matter how your other retirement investments are performing, annuities can provide a guaranteed income for as long as you live.
If you are interested in learning more about annuities and adding them to your financial portfolio please feel free to email Vickie at This email address is being protected from spambots. You need JavaScript enabled to view it. or call her at 717-790-2171.
