Annuities:
Understand the Basics
How Annuities Work:
Understanding the Basics
What is an annuity? Unclear about how annuities work? Essentially, an annuity is a contract between an individual and an insurance company. The contract owner contributes a predetermined amount of money, which earns interest over a predetermined period of time. After that, you will start receiving money. You may be able to secure guaranteed* income for life using an annuity. You can also specify whether you want payments to be made monthly, quarterly, or annually. The crediting technique used to compute the interest rate differs between annuities and individual contracts.
How Fixed Indexed Annuities Work
One type of annuity contract, a fixed indexed annuity (or FIA), can provide the option of indexed interest at a reasonable rate of return,** as well as the benefit of protecting your money.*
The cash value of your FIA is kept in reserve by the issuing insurance company while earning indexed interest at a reasonable rate of return.** Basically, the FIA’s interest rate is based on the performance of an index. When the index rises, you may see a higher interest rate, but when it falls, you will not suffer losses.* This is the important difference between an FIA and a market investment. Regardless of what happens in the stock market, your FIA’s value will stay protected.*
Annuities and Taxes
Annuities offer tax-deferred growth. This means that you only pay taxes on the money in your annuity when you withdraw funds, as opposed to many types of retirement accounts, which tax your interest. There may be further tax advantages with an FIA. For example, you may be able to defer taxes on your 401(k) or other, similar retirement plan account by rolling over the money into an annuity product instead. However, in situations like this, we always recommend you consult a skilled tax advisor.
If you’d like to learn more about how annuities work, reach out to us. Schedule a one-on-one meeting with us to discuss your specific situation and retirement goals.
Annuities
and Taxes
Annuities offer tax-deferred growth. This means that you only pay taxes on the money in your annuity when you withdraw funds, as opposed to many types of retirement accounts, which tax your interest. There may be further tax advantages with an FIA. For example, you may be able to defer taxes on your 401(k) or other, similar retirement plan account by rolling over the money into an annuity product instead. However, in situations like this, we always recommend you consult a skilled tax advisor.
If you’d like to learn more about how annuities work, reach out to us. Attend an educational seminar event where we discuss the topic (and provide a complimentary gourmet dinner). Or, schedule a one-on-one meeting with us to discuss your specific situation and retirement goals.