An annuity is a kind of insurance contract designed to provide a person with income for an amount of time. They’re sort of the opposite of life insurance policies, which are for if a person doesn’t live long enough. Annuities grow tax-deferred and can be passed to heirs without going through probate.
There are three kinds of annuities:
These have a fixed interest rate of return that usually resets annually and have a minimum guarantee to make sure a certain amount is paid out every year.
Funded with securities, stocks and unsecured bonds, these annuities shift with the economy, so they can potentially earn more than a fixed annuity, but you could also lose money on them.
A bit of a compromise between fixed and variable annuities, the payout is based on a securities index like the S&P 500 and comes with a guarantee that you will not lose your principle. You can make more than you would with a fixed annuity, or you could earn nothing at all.
There’s a lot to consider when deciding which annuity is best for you, or whether you should even have one at all. Get in touch with us so we can discuss your situation and help you make a decision.