Covering the Basics of Annuities for Annuity Awareness Month

June 07, 2023

June is Annuity Awareness Month, a time to educate individuals on the benefits and importance of annuities. If you’re new to annuities or need a refresher, keep reading to understand the basics of annuities.

Basically, an annuity is a financial product that can provide a steady stream of income during retirement. With people living longer and the uncertainty of Social Security, annuities can be a reliable source of income in retirement.

These insurance-based financial products come in different forms, such as fixed, indexed, and variable annuities. Fixed annuities provide a guaranteed rate of return, while indexed annuities offer the potential for higher returns based on the performance of a market index. Variable annuities allow individuals to invest in a variety of mutual funds and other investments, with the potential for higher returns but also higher risk.

One of the primary benefits of annuities is their tax-deferred growth. This means that earnings on the annuity are not taxed until they are withdrawn, allowing individuals to potentially earn more money over time. Annuities can also provide a death benefit to beneficiaries, ensuring that loved ones are taken care of even after the annuity holder passes away.

It is important to note that annuities are not for everyone. They can be complex and often come with fees and surrender charges if money is withdrawn before a certain date. That’s why it is important to fully understand the terms and conditions of an annuity before investing.

Annuity Awareness Month is a great opportunity to educate yourself or talk to a financial professional about the benefits and potential drawbacks of annuities. By increasing your knowledge of these financial products, you can make more informed decisions about your retirement and financial future.

An indexed annuity is for retirement or other long-term financial needs.  It is intended for a person who has sufficient cash or other liquid assets for living expenses and other unexpected emergencies, such as medical expenses. Guarantees provided by annuities are subject to the financial strength of the issuing company and not guaranteed by any bank or the FDIC.

Indexed annuities do not directly participate in any stock or equity investment.  Clients who purchase indexed annuities are not directly investing in the financial market. Market indices may not include dividends paid on the underlying stocks and therefore may not reflect the total return of the underlying stocks; neither a market index nor any indexed annuity is comparable to a direct investment in the financial markets.

Variable annuities are offered only by prospectus.  Carefully consider the investment objectives, risks, charges, and expenses of variable annuities before investing.  This and other information is contained in each fund’s prospectus, which can be obtained from your investment professional and should be read carefully before investing.  Guarantees are based upon the claims paying ability of the issuer. 

Variable annuities are long-term, tax-deferred investments designed for retirement, involve investment risks, and may lose value. Earnings are taxable as ordinary income when distributed. Individuals may be subject to a 10% additional tax for withdrawals before age 59† unless an exception to the tax is met.

Add-on benefits are available for an extra charge in addition to the ongoing fees and expenses of the annuity and may be subject to conditions and limitations. There is no guarantee that an annuity with an add-on living benefit will provide sufficient supplemental retirement income.


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This document is for educational purposes only and should not be construed as legal or tax advice. One should consult a legal or tax professional regarding their own personal situation. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products offered by an insurance company. They do not refer in any way to securities or investment advisory products. Insurance policy applications are vetted through an underwriting process set forth by the issuing insurance company. Some applications may not be accepted based upon adverse underwriting results. Death benefit payouts are based upon the claims paying ability of the issuing insurance company. The firm providing this document is not affiliated with the Social Security Administration or any other government entity.