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fixed annuities

Understanding Annuities – Things to Consider Before Buying an Annuity

Categories: Annuity Education, Fixed Annuities

Annuities offer many options for retirees and pre-retirees to increase their retirement savings and guarantee retirement income that cannot be outlived. But all of those options can become confusing, and many people have difficulty understanding their annuity choices. The main reason for all the confusion: Annuities can be single premium or flexible premium; fixed or variable; deferred or immediate. There are literally hundreds of different annuity products to choose from with features and benefits designed to address any stage in life. With all of those options, determining which annuity offers the best set of product features and most appropriate design for your unique circumstances can sometimes feel overwhelming.

Watch this short video for a good annuity overview and description of the different types of annuities available: 

Visit our Annuity Basics page to dig deeper, obtain additional guidance, and learn more about all of your annuity options.

There are three big decisions you’ll face before buying an annuity. The first is to decide why you are considering the purchase of an annuity in the first place, what is your primary goal or objective. Do you want to start receiving payments right away or would you rather watch your principal grow? Are you trying to guarantee future retirement income? Is taking advantage of the tax-deferred status of an annuity important to you? Is stock index linked interest credits without any risk of loss to your principal due to market declines an intriguing concept to you? The answers to these questions can help point you towards the best type of annuity for your individual situation.

The next big decision is determining how you will fund your annuity. Nonqualified money is money that you have already paid taxes on, such as wages earned from a job, or money situated in a savings account, bank CD or other investment product that is not part of a tax qualified account. Tax qualified funds, such as those held in an IRA or 401k account, are funds that have not yet been taxed. You can use either of these types of money to buy an annuity; there are restrictions as to the amount of new tax qualified funds you can contribute each year to buy an annuity, but the amount of nonqualified funds that you can use is unlimited.

The final decision is simply to determine which particular annuity product best meets your needs, and that’s where we can help. The Annuity Specialists at AnnuityAdvantage are highly skilled at guiding our clients through this process and have access to complete information and full disclosure on hundreds of different annuity products from the top rated insurance companies in the country. Give us a call today, we’d be happy to assist you in any way we can and patiently answer all of your questions.