Annuities Explained

Annuities are Protected Income

Whether you’re planning for retirement or retired, we all have our bucket list of things to pursue and accomplish in our next chapter of life. Whatever is on your list, most of it will involve spending some money.

That’s why millions of Americans use annuities to protect and grow their retirement savings to help cover their basic monthly expenses – things like a mortgage or rent, utilities, groceries, or transportation – so they have the peace of mind and freedom to live the retirement they want.

Annuities have protected the retirement of millions of Americans over the centuries. Benjamin Franklin saw the power of annuities by giving them to the cities of Philadelphia and Boston in his will. In 2007, then Federal Reserve Chairman Ben Bernanke disclosed that his largest financial assets are annuities.

Get started today! Click below to email your financial advisor and ask how an annuity can protect your retirement.

EMAIL YOUR FINANCIAL ADVISOR

Understanding Protected Income: Your Guide to Annuity Solutions for a Secure Retirement is the definitive 101 consumer guide to annuities. The document provides a simple but comprehensive guide to retirement income basics and how to understand and utilize annuities to live the life you want in retirement.

“There are only three sources of income you can count on for life: Social Security, a pension, and an annuity. Everything else is subject to market risks. An annuity could be the missing piece in your retirement security.”
— LIMRA
DOWNLOAD THE GUIDE

In simple terms, an annuity is a contract between an individual (or married couple) and a life insurance company. Depending on the type of annuity, you purchase an annuity with a portion of your retirement savings in either a single payment or with multiple payments over time.

There are many annuity types available today, with different features, benefits, and costs, but they basically fall into four main categories:

Fixed-rate annuity:

An annuity that earns a guaranteed interest rate for a specified period of time.

Fixed indexed annuity (FIA)

An annuity that earns a varied interest rate based on the performance of an outside index (like the S&P 500). FIAs guarantee a minimum interest rate typically between 0 and 1 percent, whereby you cannot lose your premium. Some FIAs also offer an optional guaranteed income rider or guaranteed lifetime withdrawal benefit (GLWB).

Registered index-linked annuity (RILA):

A type of variable annuity that offers limited upside
potential in exchange for limited downside protection. The account balance varies based on the performance of an outside index (like the S&P 500), but losses are limited based on a floor or buffer. Some RILAs also offer an optional guaranteed income rider or guaranteed lifetime withdrawal benefit (GLWB).

Variable annuity:

An annuity that allows you to select how your assets are invested among different investment options (similar to mutual funds). Your account value will fluctuate based on the performance of these investment options. Issued by an insurance company, the annuity may guarantee a minimum value on death and/or the option to convert into a stream of income (similar to a pension) at some future date, typically retirement. Some variable annuities offer a guaranteed lifetime withdrawal benefit (GLWB) for an additional fee.

Guaranteed lifetime withdrawal benefit (GLWB):

Depending on the age when the first withdrawal is taken, this rider guarantees you can withdraw up to a maximum percentage of your total investment each year for the rest of your life — no matter how your investment accounts perform or how long you live.

There are also two main types of payout options:

Deferred annuity:

A retirement savings product issued by an insurance company, often through a financial professional. It allows earnings to grow on a tax-deferred basis. All deferred annuities have the option to convert savings into a guaranteed income stream.

Immediate annuity:

Converts a lump sum into an income stream that begins within a year from the date of purchase and is guaranteed to pay for either a specified period or for a lifetime, similar to a pension.

Interested in learning more about how an annuity might be right for you? Check out our resources below and find a financial professional who can help get you started.

Tools & Guides