What is an Annuity and How Does It Guarantee Income?
What are annuities and how do they work? Annuities are both a savings and an income investment that pays out over a period of time. It’s actually a stream of income you can’t outlive. An annuity is a flexible insurance contract that allows retirement savings to grow income tax-deferred and then payout to you in a lump sum, income for life, or income for a certain period of time.
There are two basic types: Fixed and Variable. The Fixed Annuity earns a set yield and payout set by the contract. The Variable Annuity is invested in stocks and bonds. The growth value and potential income stream will depend on the investment returns and losses could occur. In both annuities, the growth is income tax-deferred and the contract terms control growth and income.
In today’s market, there has been a blending in the qualities of these two kinds of annuities to generate the best return for investors yet maintain the guarantees needed in retirement. There are a lot of choices and your personal situation needs to be considered. We can help you develop a plan to meet your specific needs towards a comfortable retirement, so please, schedule a 15-minute discovery call today.