If you are researching more into retirement planning and need to be better prepared, it can be a good idea to look into all options including annuity contracts to help with retirement income.
These days, social security is not enough to live off of for everybody, if you are looking for ways to expand this long-term retirement income, annuities may be exactly what you’re looking for.
In the financial world, all of this stuff can be a bit confusing and if you are feeling overwhelmed or just need to talk through this with someone, feel free to contact our financial professionals today.
But before we dive any deeper let’s look at what an annuity actually is to get a better understanding of what you can expect.
Annuities Definition
Simply put, an annuity product is an insurance contract that works by converting a lump-sum premium into consistent, guaranteed income payments for life. It is worth noting that only insurance companies, including life insurance companies, can issue a life annuity.
Along with understanding the basics of annuities, we should also cover annuity dues. A normal annuity pays you at the end of a covered term whereas an annuity due pays at the beginning of a covered term.
Now, there are two types of annuities: deferred annuity and immediate annuity. Let’s take a closer look at each of these so you know what type of annuity is best for your specific case.
Deferred Annuity
As the name suggests, a deferred annuity is designed to gain assets for retirement, and after a period of time, payments start being made. Those that go the deferred annuity route decide when payments begin and how long they will be receiving payments.
Immediate Annuity
On the other hand, an immediate annuity is purchased with a single premium which creates a stream of income sometime within the first 12 months from the date of issue.
Along with these two options, you will have to decide between fixed annuities and variable annuities.
Fixed Annuities
Fixed annuities earn a guaranteed rate of interest for a set period of time and are backed by insurance companies that issue them.
Along with normal fixed annuities, there are fixed indexed annuities that protect your deposit from losses and earn interest based on market indexes, such as the S&P 500.
Variable Annuities
Variable annuities do not guarantee a return but do offer more flexibility and room for growth. They can increase in value with investments you select within the annuity.
This is a lot of information to take in, and if you need help sorting it out, we got you covered.
Assistance with Annuities with David Henderson
As you can probably tell, this can all be a little bit confusing. Luckily, you don’t have to go at it alone. David Henderson’s team of financial professionals can help walk you through every step of the process.
To learn more about annuities or discuss a different matter, please give us a call today at 408-978-6215 or make an appointment to get started.
*Annuities are long-term investments designed for retirement purposes. Variable annuities are sold by prospectus only. An investment in the securities underlying a variable annuity involves investment risk, including possible loss of principal. The contract, when redeemed, may be worth more or less than the original investment. Guarantees are backed by the claims-paying ability of the issuer.