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Fixed and Indexed Annuities

  • American General (AIG)
  • American Equity
  • American National
  • Athene
  • Equitrust (B++)
  • Forethought
  • Great American
  • Guaranty Income Life (B+)
  • Integrity
  • Lincoln Financial Group
  • Minnesota Life (Securian)
  • Mutual of Omaha
  • Nationwide
  • North American Company
  • Protective Life
  • Prudential
  • Royal Neighbors
  • The Standard
  • Voya Financial

Annuities Explained

Annuities play a very important role in retirement planning, enabling you to save money and taxes while eliminating the fear that you will outlive your savings. Basically an annuity is an investment contract or policy between you and an insurance company. There are many kinds of annuities – some tailored for income, some for future growth, and some as savings vehicles depending on your exact income and investment needs.

There are two basic types of annuities: fixed annuities and variable annuities. Fixed annuities guarantee a set payout each month. With variable annuities payments fluctuate depending on the performance of the annuity-holder’s investments. Fixed annuities are safer, but the payment doesn’t typically rise with inflation. Variable annuities allow the potential for a higher payout, but also carry the risk of a lower payout.

The main advantage to having an annuity is that it can provide income for as long as you live. A shaky market means that 401(k) and IRA investors are rightfully nervous that market losses could mean they’ll outlive their retirement savings. With the right kind of annuity, that is avoidable.

Annuities come in two different basic types: an immediate annuity and a tax-deferred annuity. With immediate annuities, you give a lump sum of money to the insurance company. Based on your age, life expectancy, and interest rates, the insurance company calculates how much they send each month – no matter how long you live.

Immediate Annuity

An immediate annuity lets you convert all or part of your retirement savings to a guaranteed stream of income that you can count on for the rest of your life. This type of annuity gives you the security of knowing you will continue to receive money each and every month – even if you live to be 100 or older.

How an Immediate Annuity Works

You can buy an immediate annuity with funds available from a 401k, IRA, savings account, life insurance policy, inheritance, or even the sale of a home or major asset. An insurance company that you select provides the immediate annuity to you for a set upfront cost, and agrees to make regular scheduled payments to you either by check or automatic deposit to your bank.

You can choose how often you receive a payment from the annuity, such as every month, quarter or yearly. The amount of income you receive is based on the amount of money you initially contribute, plus a number of factors including your age, sex, income option selected, and interest rates at the time of purchase.

An immediate annuity could be right for you if:

  • you want the certainty of knowing you won’t outlive your income
  • you have retirement expenses not covered by your monthly pension
  • you want to eliminate future money management of your savings
  • you want to protect assets from high nursing home costs


Immediate Annuity Payout Options

There are many different types of payout options you have with an immediate annuity, with the most commonly available including:


Each payout option includes its own set of unique advantages and benefits depending on your individual need, age, objectives, health, and income requirements.

Quick Tips on Immediate Annuity Contracts

Be leery of the immediate annuity calculators you may find online. Many of them are biased as they are aligned with low or no interest products that will not give you the best performance rate for future income generation. Not all annuity calculators are created equally!

An immediate annuity is sometimes now being used to fund premiums on life and long term care insurance policies, transforming a small savings amount into a permanent guaranteed lifetime protection policy with no future worries of financial requirements.


Tax Deferred Annuities – Single Premium Deferred Annuity

What is a Single Premium Deferred Annuity?

A single premium deferred annuity, or SPDA, is an annuity you purchase with a single payment. You get a guaranteed interest rate for a specified period of time, and the taxes on the interest you earn are deferred until you make a withdrawal. Single Premium Deferred Annuities are ideal for anyone who wants to let their money grow risk-free while deferring income taxes, with the goal of creating income later in life.

Equity Indexed Annuity

Discover safety and growth with an equity indexed annuity.

The equity indexed annuity is a unique type of fixed annuity that allows an individual to participate in upsides of the stock market, without ever risking the loss of their principal due to unexpected market changes. An equity indexed annuity also guarantees a minimum interest rate regardless of future performance, with each insurance company using a different formula to calculate the rate guarantees they offer to investors.

While the stock market offers opportunities for higher returns, that upside always comes with potential risk. For conservative investments, fixed interest products prioritize safety and protection of principal, but that comes with the promise of lower returns. The equity indexed annuity was designed to provide a middle ground where performance meets safety and investors can experience the best of both worlds.

The equity indexed annuity can track a preferred stock market index, such as the S&P 500, NASDAQ, or Dow, with the rate of return usually being a set percentage of the increase the index shows over a set period, or a guaranteed minimum interest rate (whichever is higher).  That makes  the equity indexed annuity a very attractive annuity for many investors because the principal investment is protected and guaranteed from loss, while gains are locked in periodically to add to the total return and can never go backwards!

Variable Annuities

Variable annuities are used by investors who like to invest your money within investment portfolios called subaccounts, ie. Mutual funds. Unlike fixed annuities, a variable annuity does not guarantee a set rate of interest or earnings, being based instead off fund performance and account averages. However you can buy, sell and switch funds at any time without incurring taxes until you begin to withdraw your original investment and income after age 59 ½. At that time your gains are taxed as ordinary income.

The current crisis on Wall Street illustrates just how volatile the market really is. The closer you are to retirement, the scarier it is. My brother lost 40% of his 401(k) by the end of 2009, before he moved out of the market.

A fixed annuity can help you protect yourself from a market crisis.

A fixed annuity is the only investment vehicle that can guarantee you an income for your lifetime!

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