Annuities For Retirement
An annuity is a contract between you and an insurance company, in which you receive payments at set intervals, or on a predetermined schedule. Retirees generally use annuities for retirement, to provide an income stream and help with the risk of outliving income. Furthermore, there are various types of annuities. For example, there are variable annuities, fixed annuities, and fixed indexed annuities (or FIAs.) While there may be recurring income payments available with all of these annuities, only fixed annuities and FIAs provide protection of your principal. Generally, this fixed term lasts you your entire life. This is the reason why we specialize in these types of annuities. These are products, not investments.
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Phases of an Annuity
An annuity agreement has two main phases, accumulation and distribution. While the details of each annuity contract differ, these two steps will always apply to fixed indexed annuities.
Fixed Indexed Annuity: What is It?
An FIA is an annuity that maintains its value over its term, while keeping your principal safe from stock market risk. The agreement is an arrangement between you and an insurance company, whereby you make periodic payments and receive regular payouts in return. When using a fixed indexed annuity for retirement, you can ensure you won’t lose money.
Key Benefits of Using Fixed Indexed Annuities For Retirement
The earnings on FIAs accumulate tax-deferred. This means you won’t have to pay taxes on interest earned on your annuity, until you withdraw it. Withdrawals are taxed as ordinary income. By compounding interest, you can accumulate your money faster. An additional 10% federal tax may apply, if retirees take payments before they reach the age of 59 1/2
Your annuity earns interest based on the accumulation of an index, outside the annuity. Because you aren’t actively participating in the market, you aren’t putting your annuity at risk.
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