Annuities provided by Browne Insurance Services
What does retirement mean to you? You might look forward to time with your grandchildren and a favorite hobby. Or maybe you want to play endless rounds of golf and explore the world. Whatever your goals, they probably depend on a reliable source of income. And that’s where an annuity can help. They’re insurance products designed to provide you with a way to accumulate tax-deferred savings while you prepare for retirement, and a steady stream of retirement income.
What are Annuities?
Annuities are designed to help you grow your retirement income. They’re long-term contracts from an insurance company where you invest your money. In return for your investment, you get income in the form of regular payments.
An annuity is a long-term investment that is issued by an insurance company and is designed to help protect you from the risk of outliving your income. Through annuitization, your purchase payments (what you contribute) are converted into periodic payments that can last for life.
Investing involves risk, and your investments may lose value. All guarantees and protections are subject to the claims-paying ability of the issuing insurance company, but the guarantees do not apply to any vairable accounts, which are subject to investment risk, including the possible loss of principal.
Types of annuities
There are several types of annuity products available to choose from. Whether you’re looking for income options, legacy planning tools or spousal protection, your financial professional can tailor a plan to meet your specific goals.
Variable: There’s the potential for more earnings, but you also take on more risk.
Registered index-linked: Exposure to downside risk is limited, and there is potential for increased earnings based on index growth.
Fixed: Your investment grows based on a guaranteed rate of return.
Immediate: Convert a lump sum of money into a stream of income.
Fixed indexed: The potential for increased earnings is based on index growth, but there’s still downside protection.
How can Annuities be beneficial for you?
The primary benefit of investing in annuities is a guaranteed income source in the form of regular payments in or before retirement. Your contributions are tax-deferred, and annuities do not have a contribution limit or a required minimum distribution (RMD). Benefits include:
- Guaranteed income source. For retirees and pre-retirees, a guaranteed income source reduces concerns about losing money from retirement savings in a downturn, or outliving retirement savings. With an annuity, you fund the account and typically earn a predetermined amount of interest, regardless of what happens in the stock market. However, this can be different with variable annuities.
- Tax advantages. You can also defer taxes on the money you contribute to an annuity. Unlike other tax-deferred retirement savings accounts such as IRAsand 401Ks, there isn’t a contribution limit, a limit to how much you can put away each year. Annuities can provide a vehicle for tax-deferred savings if you have maxed out other retirement accounts.
- No RMDs. Traditional retirement accounts require that you begin making withdrawals at age 70 ½. Retirement annuities, however, don’t carry that same stipulation, meaning that the funds can continue to grow in the account until you need them.
Risks involved in Annuities?
Like any investments, annuities carry risks. For example, if you pass away before the payout period, you miss out on annuity payments. In addition, it may not be easy to take money out of your annuity account after you’ve invested it. Investors should research the insurance company that is underwriting the annuity. Risks include:
- Missing the income benefit. The idea behind annuities is that you save money now to have an income stream for the rest of your life. If you suddenly pass away, you would miss out on that long-term benefit. Some annuities allow you designate a beneficiary, but it may come with an extra cost.
- Tying up money you may need. Once you’ve invested your money in an annuity, it can be difficult to access it or cash it out if you suddenly need those funds. For example, some immediate annuities take away access to your principal after you have invested it, even though the payments begin right away.
- Insolvent insurance companies. Because an annuity is a long-term investment, you’ll want to make sure the company you purchase it from is around for the long term. Investors should investigate the credibility, history and credit standing of potential annuity providers.
Consult us with us to understand annuities better. Contact us today to know more about how annuities can help !