Annuities
If you are searching for a way to grow and protect your savings, an annuity can be a great place to start. An annuity is an insurance contract that requires policyholders to make premium payments now in exchange for regular payouts later. There are several types of annuities available, each offering different benefits and drawbacks.
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What Are Annuities?
Annuities are commonly used to prepare for retirement. When you purchase an annuity, you commit to making premium payments for a certain period of time. Once you’ve finished making those payments, you can begin collecting the money you put into the annuity in the future. The money in the annuity account is invested and has the potential to grow in some cases. Though, not all annuities allow investment.
Who Needs Annuities?
The purpose of annuities is to provide a steady cash flow to people who are no longer working. Therefore, it makes sense to purchase an annuity early, so you can invest as much into it as possible. Though, if you purchase an annuity too early, you may not have enough liquid income to use in your younger years. For this reason, we suggest speaking to an insurance professional before purchasing an annuity.
How Do Annuities Work?
Annuities go through two different phases: accumulation and annuitization. During accumulation, the policyholder makes payments to the annuity to fund it. Money invested in this account grows on a tax-deferred basis. Once the annuitization period begins, payments are dispersed.
Types of Annuities
Annuities can be structured based on a number of different factors. For example, some annuities are designed to provide payments until the end of one’s life, while others only disperse payments for a fixed period of time. Annuities are also divided into two categories that dictate how your money grows.
Indexed annuities pay a fixed rate of return based on a financial market’s performance, whereas a fixed annuity offers one guaranteed rate. With indexed annuities, you make money if the market performs well. Fixed annuities are effectively the opposite, as you are guaranteed a specific rate of return.
Find The Right Annuity
Which annuity is best for you depends on the type of investor you are. If you don’t mind the risk of investing in the market, choose an indexed annuity. If you are confident in your other investments and simply want a guaranteed income for retirement, fixed annuities make more sense.
To start comparing annuities today, contact Hamil Legacy. Our talented team of agents will help you find an annuity that offers you the financial security you’ll need in retirement.