Annuities - Creating Your Own Pension!

In the current environment of bank failures and market downturns, non-variable annuities offer guaranteed returns and protection. For those in the retirement “red-zone”, these are a great tool for creating guaranteed streams of income that won’t run out!

What is an annuity?

A tool providing you with peace of mind in retirement via guaranteed income.

Annuities can be purchased by an individual or through their employer. It’s a contract between you and your insurance company; you pay money into it, and in return, you receive regular payments for life. The money you pay goes into an account that earns interest over time, and when it comes time for you to collect your payments, they will be higher than what you originally put in because of the interest that has been accruing.

Annuities come in several different flavors: fixed, fixed index, and variable.

Fixed annuities are guaranteed to increase in value by a fixed percentage each year. For example, if the interest rate is 4% and the current value of your annuity is $10,000, then after one year it will be worth $10,400.

Fixed Indexed annuities (FIAs) are like fixed annuities but they also provide protection against inflation by using a formula that adjusts the interest rate each year based on changes in one or more selected Market indexes, like the S&P 500. Investors earn interest on their money based on stock market performance, but without being directly invested in the stock market. Most significantly, there is no risk of loss due to market downturns.

Variable annuities earn interest based on selected positions offered within the annuity portfolio. Performance is not guaranteed, so there is no specified rate of return or protection. These types of annuities should be chosen by those with a higher risk tolerance who are looking for greater returns when stock markets perform well.

Want to learn more? Schedule a call with me on my calendar.

For references, follow these links:

https://www.investopedia.com/search?q=annuities

https://www.forbes.com/advisor/retirement/pros-and-cons-of-annuities/