Annuity

When it comes to your money, you have a lot at stake. So it makes sense to have options. This is why annuities are so flexible. Need help determining if annuities are appropriate for your retirement goals? Keep reading to learn more.  

Content:
    Add a header to begin generating the table of contents

    What is an Annuity?

    Annuities

    An annuity is a product that provides a fixed income. It is customizable and offers tax advantages, payment terms to suit your needs, protection against the loss of your initial investment, and options to transfer funds to beneficiaries. Consumers often use their annuities to provide a lifetime income and fund their retirement. 

    It is uniquely designed to provide guaranteed income for life. It does things that no other product can do.  

    What are the benefits of annuities?

    How can annuity be an advantage to you? Check its benefits here.  

    Lifetime income guarantee 

    Annuities, as mentioned above, are meant to achieve what no other financial product can. Retirement is a time for security. Many people have bought annuities to ensure a steady income for the remainder of their life. An annuity can often provide more income for you and your beneficiaries than other financing options. 

    No other financial product can make such a guarantee. 

     Tax benefits 

     Annuities offer tax-deferred payments and a guaranteed return on your investment. The interest you earn is tax-deferred, meaning it doesn’t get taxed until it’s paid out later in life, and the rate of return is guaranteed by the insurance company (or pension fund). This means that if inflation or other factors raise or lower interest rates, your annuity still won’t be affected because it’s locked in at the original rate. 

    That is why annuities are often referred to as “fixed income investments.” They offer stability and security while also giving you an opportunity to grow your assets over time through tax-deferred growth—which means more money for retirement! 

    Annuities can provide you with both tax-advantaged growth and tax benefits when payments begin. 

    Continuation of payments after death 

    If you choose a specific kind of annuity, known as a joint and survivor annuity, it will continue to pay out after your death to your surviving spouse for the rest of his or her life if you select a specific annuity. Annuities can also be set up to pay out to a beneficiary, such as a grandchild, so they can be used as a unique financial product for transferring wealth to future generations.  

     Hassle-free 

     The annuity income goes directly to the beneficiary, without the need for a will, without going through a court-supervised process, so the annuity terms are personal and hassle-free. 

    For example, suppose a decedent in a will leaves the entire estate to two children, both of whom are under the age of 18. Without the use of an annuity, a court must appoint a guardian for the two minor children and oversee the guardianship until the children are declared legally competent at age 18 (or 21 in some states). After paying funeral expenses, attorney fees, and taxes, and distributing any entitled life insurance proceeds, the remaining amount in the estate would go to the two minor children. 

     A probate-avoidance trust can be used to avoid this type of proceeding and allow the proceeds to be distributed to the beneficiaries without court supervision and oversight. An annuity would work similarly, except that it avoids probate administration and is further insulated from any creditors or other claims. A person who buys an annuity with a large cash value will take home less money than if they left their assets in retirement accounts or other investments, but they can avoid probate completely. 

     Versatile 

     When it comes to your money, you have a lot at stake. So it makes sense to have options. This is why annuities are so flexible. Whether you’re looking for a steady income stream or a way to save for retirement, you can use an annuity to meet your financial goals. 

     Using an annuity, you can get a fixed monthly income for a set amount of time or for the rest of your life. You can also withdraw funds or convert your annuity to another product—like one that addresses long-term care expenses—when you need it. 

     Need help determining if annuities are appropriate for your retirement goals? Connect with our agents at Simple Choice Insurance Brokerage to help you figure things out!