Absolute Retirement Solutions

annuity keys

What Are Annuities and How Do They Work?

Annuities are a financial tool that can be used to create reliable income to supplement Social Security during retirement. When you buy an annuity from an insurance company, you can in return receive monthly payouts, starting now or at a specified point in the future depending on the annuity you choose. There are different types and many specific variations when it comes to annuities. Each type is designed differently and can help accomplish the unique goal of the purchaser. If you are considering buying an annuity to create guaranteed income in retirement, one of the most important features to consider is the payout structure. In other words, when will the payments begin, how long will you continue to receive them, and will your beneficiary get anything out of it when you die? In this article, we’ll describe some of the most common ways that annuities pay their owners. 

What are the benefits of annuities?

  1. Annuities offer an alternative way to save money for income in retirement
  2. Annuities can help you reduce risk by protecting your savings from market loss
  3. Annuities offer growth potential and opportunity for accumulation

Joint-Life Annuitization

This option allows you to transfer the income stream to your spouse upon your death. However, the monthly payment will be lower than it would be for a single-life option because the payment is calculated using the life expectancy of both you and your beneficiary. 

What is the difference between fixed, fixed-indexed, and variable annuities?

There are varieties and differences between products within each of these categories, however, before you consider purchasing any particular annuity, you should know the differences between these three main types.

  • A fixed annuity guarantees the interest rate you will receive and the payment amount you will receive
  • A fixed-indexed annuity gives you the potential to earn interest tied to the movement of an external market index, such as the NASDAQ or S&P500, without ever being invested in the market
  • A variable annuity offers an investment component and you can make or lose money based on the movement of the market

Are annuities good options?

Again, there’s no one-size-fits-all investment that works for everyone. When you have money that you want to protect from market loss in order to guarantee income for your future, you should at least consider your options. Your financial professional can assess your current retirement income strategy as well as your goals and determine if an annuity may benefit you. Absolute Retirement Solutions is an independent insurance agency that offers a variety of fixed annuities , based in the Kansas City metro area. Contact us to speak with a qualified professional and find out how we can help you lay the foundations for your retirement. (913) 254-3030.

Insurance and annuity guarantees are backed by the financial strength and claims-paying ability of the issuing company, and for variable annuities, they do not apply to the performance of the variable subaccounts which will fluctuate with the markets. They involve limitations, fees and charges including surrender penalties for early withdrawals.