Retirement -Annuities

An annuity is a financial contract where you make a payment or series of payments to an insurance company, and in return, they provide periodic payments to you either immediately or at a future date. Annuities offer tax-deferred growth on earnings and may include a death benefit for your beneficiary. However, when you withdraw from your annuity, the gains are taxed at ordinary income rates, and early withdrawals may incur penalties. for 9 seconds

An annuity is a contract with an insurance company where you make a lump-sum or series of payments in exchange for periodic income—either starting immediately or at a later date. It offers tax-deferred growth and often includes a death benefit to ensure your beneficiaries receive a minimum payout. However, if you withdraw funds early, you could face surrender charges and tax penalties, with gains taxed at ordinary income rates.

Multi-year Guaranteed Annuity

  • A Multi-Year Guaranteed Annuity (MYGA) is a type of fixed annuity. It has a fixed interest rate that is applied to invested funds for multiple years in a row. Sound familiar? MYGAs are like bank certificates of deposit (CDs) in many ways. MYGAs are some of the simplest forms of annuities. This type of annuity is primarily used to grow funds as opposed to generating income.

Indexed Annuity

  • A special class of annuities that yields returns on your contributions based on a specified equity-based index. These annuities can be purchased from an insurance company, and similar to other types of annuities, the terms and conditions associated with payouts will depend on what is stated in the original annuity contract.

​BREAKING DOWN ‘Indexed Annuity

  • Insurance companies commonly offer a provision of a guaranteed minimum return with indexed annuities, so even if the stock index does poorly, the annuitant will have some of his downside risk of loss limited. However, it also is common for an annuitant’s yields to be somewhat lower than expected due to the combination of caps on the maximum amount of interest earned and fee-related deductions.

  • ​For example, suppose an indexed annuity is based on the S&P 500, which earns 10% one year. The terms of an indexed annuity state that fees will be 2.5% and that the maximum cap on returns is 9%. In this case, the annuitant would only receive a total of 6.5% (9% – 2.5%) return from his or her annuity.

Fixed Annuity

  • Fixed annuities are essentially CD-like investments issued by insurance companies. Like CDs, they pay guaranteed rates of interest, in many cases higher than bank CDs.

  • Fixed annuities can be deferred or immediate. The deferred variety accumulate regular rates of interest and the immediate kind make fixed payments – determined by your age and size of your annuity – during retirement.

  • The convenience and predictability of a set payout makes a fixed annuity a popular option for retirees who want a known income stream to supplement their other retirement income.

Single Premium Immediate Annuity

  • A Single Premium Immediate Annuity (SPIA) is a contract between you and an insurance comapny. By paying in a lump sum of money you are guaranteed to receive a series of payments over a period of time.

  • ​A SPIA provides a consistent income stream that helps pay monthly bills in retirement. You give an insurance company a single lump sum of money and they give you a paycheck for life, or longer, depending on the payout option you select. Annuity income can supplement Social Security benefits, income from investments, and retirement account distributions.

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