Fee-Only Annuities

Saving for retirement is only one small part of planning for your future. Have you thought about how you’ll turn your “nest egg” into a monthly retirement income?
Annuities are long-term savings vehicles designed to do just that: grow and protect your savings leading up to retirement and then turn it into a stream of income for the rest of your life.

So, why buy an annuity? Because an annuity will do what no other investment does, providing a guaranteed income for the rest of your life. This is the main reason annuities are such a popular retirement planning strategy. They can provide a more tax-sheltered way to save for retirement, especially if you are already contributing the maximum amount to your 401(k) or individual retirement account, because they have no contribution limits. Annuities can also give you the chance to take a more aggressive investing strategy with other assets, because of the guaranteed income you will have later on.

Annuities can be fixed or variable, depending on how contributions are invested and what guarantees are offered. With a fixed annuity, an insurer guarantees to pay a specified rate of interest on the accumulated value of the annuity for a certain period of time. Both the accumulated value and the periodic payments vary with the performance of a specific portfolio of investments chosen by the contract owner. If converted to a stream of income, the payments will be fixed. Generally speaking, a fixed annuity is a more conservative investment. With a variable annuity, the contract owner can avoid inflation but assumes the investment risk. However, variable annuities also have an important insurance component; they offer insurance protection, guaranteed lifetime income options, unlimited contributions and tax-deferred growth potential. These options add certain costs, but may add value to the risk and cost.

Like with any long-term commitment, it’s important that you are comfortable and confident with your decision to invest in an annuity. Keep the following things in mind when considering an annuity:
  • Is your investment horizon long-term? Remember that annuities are long-term retirement savings programs. You should feel reasonably confident that you will not need your investment funds for other expenses before the surrender charge period expires.
  • Have you made the maximum contribution to your employer-sponsored retirement plan and/or tax-deductible IRA? While variable annuities offer benefits these other retirement programs do not, it is more beneficial for you to contribute to these other retirement plans before investing in an annuity. Unlike an annuity, contributions to these other plans may be deducted immediately from your current taxes.
  • Are you in a high tax bracket? The higher your tax bracket, the more you will benefit from a variable annuity’s tax-deferred growth.
  • Are the insurance company and investment manager reliable? Your variable annuity is an investment of a lifetime. You should make sure the insurance company has a history of financial strength and that the investment company shows a track record of trustworthy long-term performance.

There are 2 main types of annuities, immediate and deferred. Immediate annuities will do as the name implies and provide income now, while deferred annuities will provide cash flow later. Within the immediate and deferred annuities are variable and fixed annuities.

  • Immediate annuity: an annuity that is annuitized, meaning converted to an income stream for the buyer, immediately.
  • Deferred annuity: an annuity that starts paying income at a later date defined by the owner.
  • Variable annuity: an annuity where its performance and subsequent return is based on underlying investments in mutual funds.
  • Fixed annuity: an annuity that pays a guaranteed minimum rate of return and provides a fixed series of payments under conditions established when you buy the annuity.
  • Fixed indexed annuity: an annuity that has a minimum guaranteed rate of return with total returns based on an underlying index like the S&P 500.
Fee based annuities
Variable annuities are long-term investment products designed for retirement purposes and are subject to market fluctuation, investment risk, and possible loss of principal. Variable annuities contain both investment and insurance components and have fees and charges, including mortality and expense, administrative, and advisory fees. Optional features are available for an additional charge. An annuity’s value fluctuates with the market value of the underlying investment options, and all assets accumulate tax-deferred. Withdrawals of earnings are taxable as ordinary income and, if taken prior to age 59½, may be subject to an additional 10% federal tax. Withdrawals will reduce the death benefit and cash surrender value.

Carefully consider the investment objectives, risks, and charges and expenses of the fund or policy and its underlying investment options before investment. This and other important information can be found in the prospectus. Prospectuses are free and available upon request and should be read carefully before investing or sending money. For a current prospectus please contact your financial professional.

Is an annuity right for your needs? Find out with one of our Financial Planners.

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    To learn more about Insight Wealth Strategies, please call us at (800) 318-7848, email us at [email protected] or fill out the request information form.