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Annuities

Designed to Help Protect Your Money

 

An annuity is a financial product that offers a consistent income stream, commonly used for retirement planning. It involves a contract between an individual and a life insurance company, where the individual makes either a lump-sum payment or a series of contributions. In return, the insurance company provides regular payments, beginning immediately or at a future date. Annuities can ensure reliable income throughout retirement, often for life, and may offer protection against market volatility. Many annuities are referred to as Guaranteed Income Annuities (GUI). Tier 1-2 risk range.

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There are several types of annuities, each tailored to meet specific financial goals and needs:

Fixed annuities offer guaranteed payouts at regular intervals, providing a stable and predictable source of income. The interest rate is fixed and does not fluctuate with market conditions, making it a low-risk option for conservative investors.

Variable annuities allow individuals to invest in a portfolio of securities such as mutual funds/stock markets. The payout amounts vary based on the performance of the underlying investments, offering potential for higher returns but also carrying greater risk.

Indexed annuities, which are technically Variable Annuities, and participate in Stock Market gains, but not the losses, thus protecting the principal from loss.

Immediate annuities begin payout almost immediately after a lump-sum payment is made. They are ideal for individuals seeking to convert a large sum of money into a reliable income stream quickly.

Deferred annuities accumulate money over time and begin payouts at a future date, which can be beneficial for long-term retirement planning. During the accumulation phase, the invested funds grow tax deferred.

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Annuities offer several advantages that make them an attractive choice for retirement planning:

Annuities provide a reliable income stream, helping to ensure financial security during retirement.

Earnings on annuities grow tax-deferred until withdrawals are made, allowing the investment to compound more efficiently.

Annuities can be tailored to meet individual needs, with options for guaranteed lifetime income or variable payouts based on investment performance.

Certain annuities offer cost-of-living adjustments to help maintain purchasing power in the face of inflation.

Different annuities are available that can serve individual goals.

• Growth: Growing the value of the investment principal
• Income: Having lifetime income
• Hybrid: Some growth and some income

While annuities can be beneficial, it is important to consider the following factors when making a decision:

Annuities may come with various fees, including administrative fees, mortality and expense risk charges, and surrender charges for early withdrawals.

The reliability of annuity payouts depends on the financial stability of the insurance company issuing the contract.

Annuities are generally less liquid than other investments, making it difficult to access funds without incurring penalties.

Fixed annuities may not keep up with inflation, potentially eroding purchasing power over time.

 

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