— Ron Cook, Annuity Expert
What is an annuity?
Annuities can help ensure a retirement strategy and income that lasts as long as you do, which is likely to be a very long time.
In general, during the accumulation phase of an annuity contract, your earnings grow tax-deferred. You pay taxes only when you start taking withdrawals from the annuity.
Income riders may be an effective vehicle for lasting financial security. When paired with the right annuity, an income rider can provide a steady income stream for the rest of your life.
The owner can designate a beneficiary to inherit the remaining annuity payments after death. After an annuitant dies, insurance companies distribute any remaining payments to beneficiaries.
You know what your rate of return will be for a certain period of time with the fixed annuities. For seniors looking for a predictable income stream, that may be a better alternative than putting money into equities.
Your personal goals, objectives and risk tolerance will determine the type of annuity that is right for you.
A form of fixed annuity that earns interest due to changes in a market index, where the growth is bench-marked to a stock market index rather than an interest rate.
FIAs are protected from the volatility of the markets. Your money is never in the stock market. Your crediting strategy tracks the stock market, but you don’t own securities that can fall in value.
From the 1999 to 2010 many fixed index annuities have actually outperformed the indexes they were correlated with. However, they really aren't designed to outperform the stock markets even though they do at times.
Once you annuitize it with lifetime payout option or turn on the income rider payouts, you cannot outlive that income stream.
Fixed annuities are insurance contracts that pay a guaranteed rate of interest on the account owner's contributions.
The rates on fixed annuities are derived from the yield that the life insurance company generates from its investment portfolio, which is invested primarily in high-quality corporate and government bonds.
Once the initial guarantee period in the contract expires, the insurer can adjust the rate based on a stated formula or on the yield it is earning on its investment portfolio. As a measure of protection against declining interest rates, fixed annuity contracts typically include a minimum rate guarantee.
A multi-year guaranteed annuity, or MYGA, offers a predetermined and contractually guaranteed interest rate for a fixed period of time.
Since a MYGA offers a guaranteed interest rate for the entire contracted term, it’s considered a less risky investment than a variable or indexed annuity.
The ability to take partial withdrawals yearly without a penalty affords flexibility. For example, if you need money to cover a large medical bill you could pull it out of your MYGA, which might be a preferable option to taking money from an IRA or getting a 401(k) loan.
Annuity products are offered through independent licensed insurance agents. Product availability, features and rates may vary by state. This information does not represent a recommendation or advice specific to your situation. The annuity information provided comes from sources deemed to be reliable but cannot be guaranteed. Check with the annuity company for current product information, and review all annuity rates, terms, conditions and costs before making a purchasing decision. Annuity guarantees are backed by the financial strength and claims-paying ability of the issuing company.
© 2020 Ron Cook. All rights reserved.