Annuities

Annuities: A Smart Option for Guaranteed Growth and Income

Annuities are contracts offered by insurance companies that provide unique guarantees and features not typically found in other savings or investment options. The performance of an annuity depends on the claims-paying ability of the issuing company.

When used appropriately, annuities can offer some or all of the following benefits:

  • Guarantee of principalA plant growing from coins in a glassAI-generated content may be incorrect.
  • Guaranteed income for life
  • Tax-deferred growth
  • Protection from creditors
  • Probate avoidance
  • Enhanced death benefit options

There are several types of annuities available, and understanding the differences is crucial when deciding whether to purchase one. Generally, annuities are classified as either immediate or deferred.

Immediate Annuities

With an immediate annuity, you invest a lump sum and, in return, receive income either for a set period or for the rest of your life. This type of annuity is particularly effective for income planning, providing a predictable and guaranteed income stream.

Deferred Annuities

Deferred annuities function more like a savings or investment plan. Your funds grow, typically on a tax-deferred basis, until a future date. At the end of the contract, you can withdraw your funds or convert the annuity into an income stream, similar to an immediate annuity.

Within deferred annuities, the way gains and losses are credited defines the type of annuity:

  • Variable Annuities – You select from multiple investment sub-accounts, which may include stock and bond funds or fixed options. The value of your account fluctuates with the performance of your chosen investments. Many variable annuities offer riders that guarantee income or death benefits, which can add predictability but come with additional costs. It’s important to understand these fees and benefits before purchasing.
  • Fixed Annuities – These include:
    • Multi-Year Guaranteed Annuities (MYGAs): Offer a guaranteed interest rate over a set term, e.g., 3% annually for 5 years. Some may provide higher initial rates for the first year or two, then a guaranteed rate thereafter.
    • Traditional Fixed Annuities: Offer an interest rate that may adjust with the economy while providing a minimum guaranteed rate.
  • Index Annuities – Your earnings are tied to the performance of a specific market index. While growth potential may be higher, returns are limited based on the index performance, and principal can be affected by early withdrawals.

Important Consideration: Most annuities impose surrender charges if you withdraw funds before the end of the term, so they are not ideal for individuals who require full liquidity.

At Preservation 1st Financial Group, LLC, we have access to over 100 annuity programs and can help find the one that best fits your needs. We take the time to understand your goals and recommend the right annuity or combination of annuities to meet them.

Call us today at 1-888-527-0872 to learn how an annuity can help you achieve financial security.