An annuity is a contract you purchase from an insurance company. You provide either a lump sum or series of payments and in return receive payments at a specified date. When you purchase an annuity, you can choose to receive payments for the rest of your life, which can guarantee* income when you retire. Lifetime income** may be available in a base annuity contract or may be available through the purchase of a rider for additional premium. For many seniors, this is an excellent financial income planning tool that helps provides a steady cash flow later in life.
There are a few different types of annuities, and not all have the same level of risk. Compared to purchasing stocks, buying a fixed annuity is a much more conservative bet. The insurance company will return a fixed rate on the annuity for life or a certain number of years. Purchasing a fixed annuity can help increase your retirement income without exposure to market.
What Is A Variable Annuity?
By comparison, a variable annuity is also a contract purchased through an insurance company, but there is generally no guaranteed* rate of return. Instead, the return is directly tied to the market conditions and how the investments you select perform. This provides variable annuity owners the opportunity to receive higher returns on their annuity when the market is doing well, and it also means there is more risk if the market is doing poorly.
Is A Variable Annuity Right For Me?
Insurance companies often sell these products as part of retirement income strategies, but they may not be the right approach for everyone. In general, the older you are, the less likely it is that variable annuities are the best choice for your needs when compared to other annuities. Not only are there higher risks associated with variable annuities, but there are also many additional costs that can lower the return rate. Some of these costs include:
- Mortality and risk expense
- Administrative fees
- Underlying fund fees
If you're seeking a retirement income planning vehicle that will help provide you with a steady stream of income for the rest of your life, there are annuities that can bring you money and financial confidence. At J.D. Mellberg, we offer an array of retirement income strategies that will help you get the most out of your money.
Call today and we’ll put you in touch with a J.D. Mellberg licensed professional in your area. Just give call us at 1-877-805-0151.