Let’s take a look at some details of annuities. Typically, annuities have two components, the accumulation period and the annuitization period. The accumulation period is when you are investing into the annuity. This is the time when you put money into the annuity to either defer for future use or to immediately begin taking income payments.

The annuitization period refers to when and how the money is distributed into an income stream. This is the fun part, where you get additional income to supplement your other retirement. The income you receive can be payed out monthly, quarterly, yearly or sometimes in one lump sum payment. The size of your payments is based on a variety of factors including the length of your accumulation and payment period. Payments can be made it several different ways, but are usually made for the rest or your life or for a certain amount of years. You control how the payments are disbursed.

Annuities come in two formats: immediate annuities and deferred annuities. Immediate annuities are vehicles that begin to pay out income immediately, just like the name says. You put in a lump sum of money and payments begin immediately. Deferred annuities are slightly different. These products require a single premium up front, which is then deferred and turned into an income stream at a later date, usually around 59 1/2 or when you retire. Additional deposits can also be made to your annuity and remember, the money is growing tax-deferred over time!

Types Of Annuities

Fixed Annuities– Fixed annuities mimic a CD. These are guaranteed 3-10 year products, in which insurance companies will pay you a percentage of interest every year for the life of the policy. Fixed annuities protect from market corrections just like CD’s, but these products offer a much higher rate of return! The average interest rate on CD’s is just 1.21%, while annuities average between 2%-3%! An annuity will out perform a CD 99% of the time!

Variable Annuities– Variable annuities allow you to invest your money into the market and then take immediate income payments or deferred income payments for retirement. Investing in the market allows for a huge upside potentially, but the downside is, there is no floor. If the market has a bad year, so does your money. For more info, ask one of our licensed agents.

Fixed Index Annuities– Indexed annuity products are great investment vehicle for your retirement. FIA’s are pretty much the best of both worlds. There is big growth potential with none of the downsides of having your money participate in the market like variable annuities. Fixed index annuities credit interest to your investment based on the performance of a financial index, such as the S&P 500. Interest rates are usually between 4%-6% depending on the product and there is always a floor rate of 0%, so no negative returns.

Is An Annuity Right For Me?

This is a great question and we would love to discuss how an annuity could be a great vehicle for your retirement. Some questions to consider when pursing an annuity might be:

• What do I want this money to do for me?
• How are my current investments performing?
• Am I concerned about out living my money? Do I want immediate income when I retire?
• Am I concerned about saving money and keeping it saved?
• If the market were to correct, how would that affect my portfolio?
• Is there a gap in my retirement?

At Senior Insurance, we want you to succeed in your retirement and enjoy the lifestyle you worked so hard to build. Give one of our licensed agents a call today at 1-800-594-5393 and let us help you find an annuity product that fits your needs!