Learn about annuities from Fairchild, Addison & McKone, and contact our team for guidance.
An annuity is a type of insurance product that pays back income over several years, often for the remainder of your life.
In exchange for your contribution in an annuity product, you receive monthly, quarterly, or annual payments on an agreed date or dates in the future.
There are many variables with annuities, which is why it’s recommended that you consult with a trusted, full-service insurance agent before taking part in an annuity.
What Are Annuities Used For?
Due to the nature of annuities, and the fact that payments are guaranteed for a lifetime or a specified number of years, annuities are a popular choice for folks looking for steady and reliable retirement income.
Annuities are particularly interesting for soon-to-be retirees who find themselves with less savings than they would like for their imminent retirement.
How Do Annuities Work?
Essentially, your initial payment toward an annuity is held in escrow, along with a pool of other annuity contributors.
Your contributions can take the form of several payments over time, or you can pay in one or more lump sums. For instance, if you would like to retire in ten years, you could make monthly, quarterly, or annual payments into an annuity plan during those ten years.
Then, when you’re ready to retire, you can begin to receive payments from the annuity instead of paying in. You aren’t obligated to start taking the payments at any certain point.
If you’re feeling financially comfortable, you can still retire and delay receiving your annuity payments until such date as you need the annuity income.
What If I Live Longer Than the Money Lasts?
This is why annuities are so attractive.
Since this is essentially a form of insurance, you are guaranteed payments for as long as you live or until the pre-agreed term of the annuity runs out.
If you live a long life, you could end up getting more in payments from the annuity than you paid in.
What If I Pass Away Before the Money Runs Out?
When you contribute to certain kinds of annuities, your trusted insurance company will ask you to designate a benefactor, just as you would with a life insurance policy.
If you’ve chosen an annuity that gives survivor payments, then if for some reason you pass away before you’ve received all the money you’ve paid in, your heirs will receive either a lump sum balance payment, or monthly or quarterly payments.
This can be a great financial help if you leave behind a spouse or children who will be responsible for managing your funeral arrangements and estate.
What Will My Payments Be?
The amount of your payments is determined by several factors, including your premiums, and the length of time you receive payments.
Are There Tax Benefits to an Annuity?
Definitely! You don’t pay taxes right away on the money that you put into your annuity. It grows at a certain rate of interest, without you having to pay tax on that interest income.
You don’t pay taxes on the income payments you receive from your annuity all at once, either. Since you only take payments, you’ll pay taxes only on the payments that you get, not the whole balance of the annuity.
There’s an invisible tax benefit, too, because when you are ready to retire and start receiving payments from your annuity, it’s likely that you’ll be in a lower tax bracket, saving you even more money on taxes.
Annuities are a strategic tool that more people are taking advantage of to supplement their retirement income. As mentioned, there are a wide variety of options to choose from, and it’s important to choose an annuity that suits your personal situation, needs and goals.
Please contact one of our representatives today to find out if an annuity is right for you.
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