Navigating the Complex World of Annuities

 

Today, there is a vast array of annuities available, offering far more options than in the past. Unfortunately, this abundance of choice has led to a proliferation of misinformation, often spread by salespeople who may push unsuitable options.

 

Much of what you hear about annuities might not be accurate. Although many annuities share similar benefits, such as tax-deferred earnings, they differ greatly in terms of investment methods or indices. It's important to understand how these variations can best serve your unique financial situation.

 

Below are some generic characteristics of most annuities currently available on the market. However, at Financial 411, we prioritize finding the plan(s) that align with your specific goals and needs, ensuring you achieve the results you deserve.

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​Types of Annuities

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Immediate Annuities - Allow you to create a stream of payments for the period you choose from as little as 5 yrs or for the rest of your life.  For example, if you received money from an inheritance, the sale of property, life insurance proceeds, etc., you can use that money to set up an annuity that can provide you with that Immediate stream of monthly payments. Both deferred and immediate annuities  come in several varieties:

 

Deferred Annuities - Allow you to save money for retirement (and other reasons), although, an annuity will not be right for every specific objective.  Deferred annuities... defer income taxes on earnings (until you withdraw them) and it also defers the time frame from which you may want to begin taking an income.  As a result, this allows your funds to grow in a tax-favored manner and may create a significant advantage both during the accumulation and distribution phases of your retirement.

 

Fixed Annuities -  Savings Plans basically guaranteed minimum interest rate programs, where the rate of interest is set by the carrier prior to your deposit and offered for a specific period of time only. They are the lowest financial risk and with the most conservative returns. Growth here is also tax-deferred until withdrawn.

 

Fixed-Indexed Annuities - Known by their acronym FIA... have the BEST possibility to earn a higher interest rate based on the performance of a market index. However, there generally isn't a guaranteed minimum return (Optional INCOME riders may be used to provide a minimum guarantee, but they can come at a cost. Determining if that works for you or not can only be completed after a review by a trusted professional. Generally, FIA's offered reasonable to moderate returns, until recently where we have now begun to see returns on the better programs in double digits annually.  In the end, FIA's are a much safer, but competitive alternative and are the only programs where you can generate growth even in a down market. (You gotta see this). 

 

Variable Annuities - (VA) Offer choices between sub-accounts (similar to mutual funds), to offer higher earnings potential, but there isn’t a guaranteed return. Variable annuities are often laden with hidden fees & expenses, and as a result, often have the greatest risk attached to them, because there’s a chance you could lose some or all of your money. As a result, we have chosen to no longer offer V.A. Products. 

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​When considering an annuity, it's imperative to understand these diverse features and benefits to determine which type best aligns with your financial objectives and lifestyle needs. Consulting with a financial advisor can help you navigate these options and select an annuity that offers the right combination of growth potential, steady income, and tailored features suited to your long-term financial plans.

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Note: VA's require a securities-licensed representative to discuss and/or assist you to invest into these products.