Annuities are one way to generate a lifetime income, save for retirement, and leave a financial legacy. However, there are three main types of annuities—fixed, variable, and indexed—so selecting the right one for you can get complicated.
A fixed annuity promises that you’ll earn a stated interest rate on your money, resulting in the same payout year after year. This type of investment is essentially risk-free. The insurance company assumes all the risks and guarantees that you’ll make the stated interest rate. Fixed annuities aren’t tied to the stock market in any way.
With a variable annuity, you can make either a lump-sum payment or a series of payments. The company agrees to make consistent payments to you immediately or at a specified future date. Variable annuities combine the elements of mutual funds, life insurance, and tax-deferred retirement savings plans. When you invest in a variable annuity, you can select from various mutual funds.
With an indexed annuity, you can take a one-time payment or a series of payments. The company will credit you the return calculated by the changes on a particular index, such as the S&P 500. It’ll also guarantee you a minimum return, though these minimums can vary from one company to the next.
Along with each of these main types, there are differences in accumulation, payout, and costs so before you talk with your financial professional, ask yourself:
What’ll I use this annuity for?
- If you’re retired or nearing retirement and need a consistent income, a fixed annuity might be the right choice
- If you’re building up for retirement, you might consider a variable annuity or an indexed annuity
- If you’re going to leave your annuity to your children or grandchildren, consider a variable annuity with a death benefit
Finding the right annuity can be a daunting task, given all the variables, so don’t do it alone. Call us, your trusted financial professional, at (603) 261-3736, and together let’s narrow the field down to the investment solution that’s right for you!
Adapted from Investopedia1
Bob has a passion for making your money work hard for you. He takes profound joy in ironing out a plan for a long and comfortable retirement, no matter what your current income or level of wealth. With a work ethic second to none, he has a zeal for transforming uncertainty into stable ways for you to protect your future and your family. He knows that the quality of your life you enjoy today can remain as rewarding—or even better—after retirement.
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