What Are the Benefits of an Annuity?

When learning about retirement options many people ask “Are fixed index annuities a good investment? While the answer is clear once you learn a few key points, you need to understand that everyone’s situation is different. It’s important to take the time you need to figure out if a product is the right fit for you. You want to make sure that an annuity can help by providing you with enough to live off in retirement. Finally, take a look at your goals for retirement. Do annuities align with your goals? In order to make an informed decision on how an annuity may align with your goals its important to understand the benefits of an annuity.

Understanding the benefits of a fixed index annuity will help you to make an informed decision regarding whether or not they are the right choice for you. The products can offer index interest potential, tax deferrals, and other potential benefits that could help protect you. It’s because of those benefits of a fixed index annuity, that your retirement income could be in a safer place with an FIA.

Tax Deferral

Under the current federal income tax law, any interest accrued on your fixed index annuity contract is tax-deferred. That means you won’t have to pay ordinary income taxes on any taxable portion until you start to collect payments from your contract. Payments are taxed as ordinary income. So, if payments are taken before a retiree is 59 ½, a 10% additional federal tax or surrender charge may apply.

Indexed Interest Potential

A fixed index annuity may present a chance for potential interest growth. This is based on the changes in or more indexes. Due to potential indexed interest, fixed index annuities (FIAs) provide a custom potential for growth. Because the interest your contract occurs is tax-deferred, there is a chance it could earn assets quicker.

An FIA Can Offer Protection Benefits

One of the many benefits of an annuity is the level of protection offered by a fixed index annuity. It can benefit you in three separate ways:

Accumulation: Your principal and credited interest are protected

Legacy: One of the benefits of an annuity, like a fixed index annuity (FIA), is protection that extends beyond life. If you pass away before you start collecting payments, a fixed index annuity may help you to provide for your loved ones after you pass. In some cases, even if you pass away after you have started to receive payments from your annuity, there is a chance that they can still receive a death benefit. Your beneficiary can collect this money as one lump sum, or in payments.

Guaranteed Income: A guaranteed lifetime income annuity can help protect you against the risk of outliving your retirement savings. Retirement has changed in America. More and more retirees are living well into their 90’s. So what happens, if you have concerns about living past your retirement savings. A fixed index annuity might be an option because it generates a reliable stream of income that can’t be outlived. Additionally, you have multiple options to choose from in terms of how and when to withdraw your payments. Some of these options include a guaranteed monthly check for the rest of your life.

Is a Fixed Index Annuity Right For Me?

Fixed index annuities (FIA’s) is a contract with an insurance company. You agree to place funds into the annuity. Then, the insurance company consents to pay you a fixed interest rate on that money over a certain amount of time. An example of this is a period of 10 years. The first phase is accumulation during which your money will grow. Once the waiting period ends, the payout phase begins. At this point, you can begin to receive payments, while still keeping your money safe.

Learn About Your Annuity Options

When thinking about your annuity choices, it’s important to get educated and review all your options. Are fixed indexed annuities right for you? Make the choice for yourself with the help of our experts. Just give our team at Cornerstone Wealth Management a call. We’re here to help answer your questions and guide you to make the decision that’s best for you. Learn about your options at one of our educational seminars.

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