Annuities and You
An annuity allows a customer to deposit money (premiums) with an insurance company that can earn interest and grow on a tax-deferred basis with the agreement that the insurance company will then provide a series of payments back to the customer at regular intervals.
People typically purchase annuities to provide or supplement retirement income they will receive from Social Security, pension benefits, investments and other sources. You can convert your annuity into a stream of income that can then be paid over a fixed period or for your lifetime. You can take withdrawals of varying amounts when you need the income.
There are generally two different types of annuities:
IMMEDIATE
Provides income payments that normally begin within a year after the premium is paid.
DEFERRED
Provide income payments that begin later, often after many years. Deferred annuities are designed for long-term savings purposes.
- Available to purchase using a single lump sum, or with flexible premiums over time.
- When it comes time to take income from your deferred annuity, you will have many options available to meet your needs.
NOT JUST FOR WEALTH PRESERVATION
Annuities traditionally have been used as a wealth preservation, allowing you to protect your principal but earning low returns with a cap of 3-4%. However, there are now annuities that will still protect your money, but it can give up to 210% of the market growth.
Some annuities also offer you a lifetime income, ensuring that your money will never run out. Furthermore, depending on the state where you live, you may even automatically get a chronic illness protection that doubles your lifetime income.