Much like insuring a home, car, or even your life, shielding your retirement income from loss should be top of mind.
Some annuity products have a nursing home multiplier and a lifetime payment option.
ANNUITIES
What is an ANNUITY
Annuities are financial products that can offer both protection for your savings from market loss and a guaranteed income stream. At its core, an annuity is an insurance product. It’s a contract between you and an insurance company where you make a lump sum payment or series of payments (known as premium) to the insurance company for a future guaranteed income stream. You can choose from a deferred or immediate annuity, depending on your needs and specific goals.
An annuity is a contract in which an insurance company makes a series of income payments at regular intervals in return for a premium or premiums you have paid. Annuities are most often bought for future retirement income. Only an annuity can pay an income that can be guaranteed to last as long as you live. An annuity is neither a life insurance nor a health insurance policy. It’s not a savings account or a savings certificate. You shouldn’t buy an annuity to reach short-term financial goals.
A deferred annuity has two parts or periods. During the accumulation period, the money you put into the annuity, less any applicable charges, earns interest. The earnings grow tax-deferred as long as you leave them in the annuity. During the second period, called the payout period, the company pays income to you or to someone you choose.
LET'S LOOK AT SOME ANNUITY OPTIONS:
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FIA: Fixed Index Annuity. An FIA is a product that earns interest based on changes in a market index. Upside potential, with no risk of losing premium due to market downturns. Most popular type of annuity.
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MYGA: Multi-Year Guarantee Annuity. A MYGA guarantees an interest rate for the time period selected when you open you contract.
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SPIA: Single Premium Immediate Annuity. A SPIA can provide guaranteed income for life or over a set period of time.
THE DIFFERENT KINDS OF ANNUITIES:
This explains major differences in different kinds of annuities to help you understand how each might meet your needs. But look at the specific terms of an individual contract you’re considering and the disclosure document you receive. If your annuity is being used to fund or provide benefits under a pension plan the benefits you get will depend on the terms of the plan. Contact your pension plan administrator for information.
WHAT ARE YOUR ANNUITY GOALS?
Here are a few goals to consider when researching Annuities.
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You would like your assets protected from loss, but still have opportunities for growth.
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You want to have a guaranteed income stream that won't outlive you.
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You like the idea of an annuity, but you want the ability to access funds if you need them.
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You want to create a legacy for your loved ones, or to a cause you believe in.
No matter where you’re at on your financial journey, it’s important to pinpoint your primary goal. Are you looking for growth potential while working toward retirement? Are you ready for a retirement income stream, or legacy protection?
Single Premium or Multiple Premium
You pay the insurance company only one payment for a single premium annuity. You make a series of payments for a multiple premium annuity. There are two kinds of multiple premium annuities. One kind is a flexible premium contract. Within set limits, you pay as much premium as you want, whenever you want. In the other kind, a scheduled premium annuity, the contract spells out your payments and how often you’ll make them.
Immediate or Deferred
With an immediate annuity, income payments start no later than one year after you pay the premium. You usually pay for an immediate annuity with one payment. The income payments from a deferred annuity often start many years later. Deferred annuities have an accumulation period, which is the time between when you start paying premiums and when income payments start.
Fixed or Variable
Fixed
During the accumulation period of a fixed deferred annuity, your money (less any applicable charges) earns interest at rates set by the insurance company or in a way spelled out in the annuity contract. The company guarantees that it will pay no less than a minimum rate of interest. During the payout period, the amount of each income payment to you is generally set when the payments start and will not change.
Variable
During the accumulation period of a variable annuity the insurance company puts your premiums (less any applicable charges) into a separate account. You decide how the company will invest those premiums, depending on how much risk you want to take. You may put your premium into a stock, bond or other account, with no guarantees, or into a fixed account, with a minimum guaranteed interest. During the payout period of a variable annuity, the amount of each income payment to you may be fixed (set at the beginning) or variable (changing with the value of the investments in the separate account).