Annuities:
Understand the Basics
Understanding Annuity Basics
What is an annuity? An annuity is basically an agreement between a person and an insurance company. A set amount of money that you agree to contribute accrues interest over time. After that, you’ll begin receiving payments. You could set it up so you receive payments from your annuity for the rest of your life. You may also be able to choose rather you receive payments on a monthly, quarterly, or annual basis. Additional information, such as the method used to calculate the interest rate, varies between various annuity types and individual contracts.
Fixed Indexed
Annuity Basics
One kind of annuity product that has the potential for indexed interest and the advantage of keeping your money safe is a fixed indexed annuity, or FIA. The performance of a market index will determine increases in your interest rate with an FIA. However, an FIA is not an investment. As a result, it will not lose value if the index declines. Your annuity’s cash value will be protected no matter what happens in the stock market.*
Annuities and Taxes
Annuities come with the benefit of tax-deferred growth. You only pay taxes on the money in your annuity when you withdraw it, in contrast to certain types of retirement plan accounts that tax your interest. There might be further tax advantages, too. For instance, you might be able to defer paying taxes on a lump sum payout you got from an employer-issued 401(1k) by transferring the funds into an annuity instead. Remember to consult a qualified tax advisor for situations like this.
If you want to learn more about annuity basics, reach out to us. Reserve a seat at one of our educational seminar events (which typically come with a complimentary gourmet dinner) or schedule a one-on-one meeting with us to discuss your options.
