Understanding Annuities: The Basics

Throughout your life, you may have opportunities to make investments and secure your financial future. Making the right choices ahead of time can make all the difference as you lay the groundwork for a comfortable retirement or fortify your fiscal security against unexpected hardships. With these goals in mind, annuities emerge as potentially valuable opportunities.

What Is an Annuity and How Does It Work?

An annuity is a long-term investment issued by an insurance company and is often designed to help protect you from the risk of outliving your income. Through annuitization, your purchase investments and contributions can be converted into periodic payments that may even last the rest of your life.

Generally speaking, annuities entail you making an investment, which can later be relied upon to provide a reliable source of income for you and your loved ones down the road. The income you receive from an annuity can be doled out monthly, quarterly, annually or even in a lump sum payment.

Different Types of Annuities

Annuities may come in many forms, but most can be classified as one of the following:

• Fixed annuities—These are annuities with a fixed interest rate that will not lose value over time. The insurance company promises a minimum rate of interest and a fixed amount of periodic payments.
• Variable annuities—These provide a chance for higher returns, coupled with higher risk. The insurance company typically offers a range of investment options, and your annuity’s value will vary based on the performance of those investments.
• Indexed annuities—These are fixed annuities, but they offer returns based on a stock index performance (e.g., the S&P 500) rather than a fixed interest rate.
• Immediate annuities—This type of annuity may be suitable if you plan to begin withdrawing money within the first year following your investment.

Why Are Annuities Important?

Annuities are primarily used to secure a steady cash flow for individuals during their retirement years. They can offer a way to ensure consistent income throughout the rest of your life, regardless of whether you continue to work.

For many individuals and families, annuities can be important because they provide a hedge against something other investments may not be capable of—the risk of outliving your savings. Because annuities may often guarantee income throughout the remainder of your lifetime, they can prove to be a vital tool in retirement planning.

We’re Here to Help

At Findlow Insurance, we take pride in helping individuals and families in the Forked River, NJ, area secure their long-term financial interests. Visit our website or call 732-995-8694 to learn more about annuities today.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.