life insurance

Annuities

What is an Annuity?

income over time

An annuity is a financial product sold by insurance companies that provides guaranteed income over time, usually for retirement.

Think of it as: you pay money into an annuity now (either all at once or over time), and later the insurance company pays you back in regular installments (monthly, quarterly, yearly) for a set period or even for the rest of your life.

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Indemnity Insurance

Key Features of Annuities

  • Income stream: Provides steady payments, like a “paycheck” in retirement.
  • Tax-deferred growth: Money inside an annuity grows tax-deferred until you withdraw it.
  • Longevity protection: Some annuities guarantee income for as long as you live.
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Types of Annuities

1. By Payout Timing

  • Immediate Annuity: You pay a lump sum, and payments start right away (good for retirees needing income now).
  • Deferred Annuity: You invest now, and payments start later (good for people planning for future retirement).

2. By Investment Style

  • Fixed Annuity: Pays a guaranteed interest rate and predictable payments. Low risk.
  • Variable Annuity: Payments depend on investments (like mutual funds). Higher risk, higher growth potential.
  • Indexed Annuity: Growth tied to a market index (like the S&P 500), with some guarantees but also limits on gains.

3. By Duration

  • Life Annuity: Pays for as long as you live (can be single life or joint life with a spouse).
  • Period Certain Annuity: Pays for a set number of years (e.g., 10 or 20 years), even if you die early.
Indemnity Insurance

Pros and Cons

Advantages:

  • Guaranteed income in retirement.
  • Protects against outliving your savings.
  • Tax-deferred growth.

Disadvantages:

  • Can have high fees (especially variable annuities).
  • Less flexible—you’re locking your money away.
  • Inflation may reduce the value of fixed payments.
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Quick Example

  • You invest $100,000 in an immediate fixed annuity at age 65.

  • The insurance company pays you $500/month for the rest of your life.

  • Even if you live to 100, you keep receiving payments.

An annuity is like buying yourself a pension—trade money now for guaranteed future income. Contact us to get started today.

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