Understanding Annuities

Annuities serve as a valuable tool in retirement planning by allowing individuals to accumulate funds and guarantee a consistent income stream for the rest of their lives. If you have been thinking lately about what you are going to do for a stream of money as you get older to pay for basic expenses and enjoy a comfortable quality of life, annuities are a great solution. They function as a contract between you and an insurance company, as you will make payments to the insurer upfront in exchange for getting payouts later on, when you reach a set age. 

There are plenty of different annuity types to pick from when getting started with this type of financial planning. The three primary options you’ll find on the market are fixed annuities, variable annuities, and indexed annuities. We’ll go into a little more detail later in the article on what these are and how they can work for you. Of course, you are welcome to contact ISU Armac at any time to be guided through the process and get direct help picking out the right annuity for your financial needs and goals.

Steady Income for Retirement

The thought of leaving the workplace can be scary. Sure, you are excited about the free time that will soon be on your hands, but what are you going to do to pay for life’s many expenses? Even if you have some other financial tools in place to account for your retirement years, along with social security, it can still be difficult to make ends meet. 

Annuities are a great way to fill the gap. Instead of relying only on social security and whatever comes from your past employer, you’ll have another layer of financial stability added into the mix. So, not only will you be able to enjoy a comfortable retirement, but you’ll be able to do and see the things you’ve always dreamed of, while leaving financial concerns in the past.

Protection Against Market Volatility

Is a big portion of your plan for retirement connected to the stock market? That’s a common approach, but one that can be very volatile. When things are good, they can be very good – but it’s just as possible for your investments to move in the wrong direction. Even if you are willing to take on some risk personally, you don’t want to have your entire retirement plan pegged to whether or not the stock market performs well in the years ahead.

One way to get around this issue is through the use of fixed annuities. Since your return is fixed, it will be independent of the stock market, and you’ll get the payments you expect regardless of marketing conditions. Using only fixed annuities would somewhat limit the potential of your retirement portfolio, so many people use a blend of financial planning products to create a nicely balanced approach. 

Tailored Annuity Solutions to Meet Your Needs

As mentioned above, there are different types of annuities designed to meet the needs of various people and their circumstances. You might choose to use just one of these types, or your portfolio might contain a blend of these instruments to leave you in a place where you feel comfortable. The three main options you’ll have available are as follows –

• Fixed annuities. With a fixed annuity, you invest a set amount of money with the insurance company you choose, and they guarantee a set return in exchange. If you want a reliable income stream when you retire, a fixed annuity is a safe play. 
• Variable annuities. In this case, the contributions to the annuity can be invested in various mutual funds and other options, and the return will then be determined by how those investments perform. There is more risk involved here, of course, but there is also the potential for a greater return.  
• Indexed annuities. This last option ties your annuity to a market index, like the S&P 500. In most cases, there will be a guaranteed minimum return with an indexed annuity, so even if the market performs very poorly, you’ll still have a base level of return provided for your investment. You can think of this option as falling somewhere in between the two listed above. 

Tax Advantages and Estate Planning

If you have been working with your accountant on your tax situation and you need a place to make some pre-tax contributions, annuities are a common option. You’ll usually pay tax on the payments that are received later, rather than the contributions made now, so you can defer the tax burden. Also, you can pick annuities that will include your beneficiaries, if you so wish, adding a layer of protection for them as well as yourself. 

Expertise and Reliability with ISU Armac

Annuities can be an excellent financial planning tool, but only when utilized correctly. At ISU Insurance Services, we want to make sure you get the ideal results from your chosen annuities, so you can set financial worries to the side and focus on more important things in life. Give us a call or send us a message today to get started and one of our agents will be happy to assist. Thank for you considering ISU Armac!