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What is an annuity?
Explore how annuities empower individuals planning for retirement by offering informative insights into securing a stable income for the future.
An annuity is a financial product or contract that is typically offered by insurance companies and designed to provide a stream of income to the annuitant (the person who owns the annuity) over a specified period of time or for the rest of their life. It is commonly used as a retirement savings vehicle to supplement other sources of income during retirement and help individuals address the risk of outliving their savings. Most annuities are purchased with a lump sum of money for as little as $10,000 up to millions of dollars.
What is a Fixed Index Annuity?
A fixed index annuity gives you more performance risk than a regular fixed annuity however much more potential return.
As its name implies, a fixed index annuity is a type of fixed annuity in which the interest rate is determined in part by reference to an investment-based index such as the S&P 500 Composite Stock Price Index which is a collection of 500 stocks intended to represent a broad segment of the market. As interest is credited, the interest earnings are locked-in to the account value and the account will not participate in any future market downturns, so your gains will never be lost.
Because of this reference to an index, the annuity offers the best of both worlds with the ability to earn credited interest resulting from a rising financial market while at the same time providing the security and guarantees similar to those associated with traditional fixed annuities.
Who Buys Annuities?
Annuities are appropriate financial products for individuals seeking stable, guaranteed retirement income. They’re also appropriate for individuals with old 401k’s from a previous job that they can roll over into the safety and security of an Annuity. Fixed Index Annuities have some great growth potential and are guaranteed to never ever lose value due to a market downturn. Finally, Annuity holders cannot outlive their income stream, which hedges longevity risk, so these are great accounts for people with long life expectancy.