What is an annuity?
An annuity is a long-term investment between you, the annuitant, and an insurance company, the annuity issuer. Under this contract, you pay a premium to the insurance company for their guarantee to pay you a lifetime income. Annuities are the only contracts that provide guaranteed lifetime income.
Fixed Annuity: A fixed annuity is an annuity with a guaranteed interest rate.
Indexed Annuity:(also called an equity-indexed annuity, or fixed-index annuity) An indexed annuity is a fixed annuity with the interest rate fluctuating with an index such as the S&P 500. If the markets go down you will not lose any money. One unique feature of indexed annuities is that your gains are locked in, and your contract value will never go below that amount. You can also add an income and/ or death benefit rider for extra protection
An immediate annuity (sometimes called a single premium immediate annuity or SPIA) can begin paying you right away. You can choose whether you want your income guaranteed for a specific time period (i.e. 10 years) or if you want lifetime payments. The amount of your payments is calculated based on your initial investment and age.
Why buy an annuity?
An annuity is a good investment option for people who are want to have some upside potential without any downside risk. Your earnings can then be used for supplemental income during retirement, guaranteed financial independence as you age, or a monetary legacy to leave behind for your loved ones. An annuity can help you continue living comfortably well into old age.
Unlike other investment plans, there is no limit to how much you can invest in an annuity. Your funds will steadily grow with a tax-deferred status, and you pay your regular tax income rate on only your earnings upon withdrawal.
The guarantees associated with annuities apply only if the annuity is held until the end of the contract term. Loss of principal is possible if the annuity is surrendered before the end of the contract term. The guarantees of some annuities may only cover a specific percentage of the initial investment; therefore it is possible to lose money.
Annuities are long-term investments and withdrawals prior to the end of the surrender period may be subject to surrender charges and withdrawals of earnings are taxable."
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