Variable Annuity Primer
WHAT IS A VARIABLE ANNUITY?
In this short primer, we’ll introduce some of the key features of variable annuities so that you can begin to get an understanding of whether or not a variable annuity is right for you.
The basics
A variable annuity is a contract between you and an insurance company. In exchange for an upfront payment, the insurance company will provide payments to you in the future.
Generally speaking, variable annuities provide a “floor” level of guaranteed monthly income. On top of that, you are able to participate in the growth of your investment account within the annuity with increased monthly income. This happens when markets rise high enough to generate additional income for the account.
Who benefits from variable annuities?
Variable annuities can be useful for investors who are interested in having exposure to market growth but who prioritize stable monthly income.
Having a pre-determined, stable income can help you with budgeting, savings, and determining an appropriate draw-down rate from your retirement accounts. Having exposure to market growth means you can enjoy a higher income when markets deliver higher returns.
What should I consider?
The number one issue we recommend considering are your priorities for retirement. Generally speaking, annuities make sense for retirees who want stable, consistent income in retirement. They are also generally better for investors with longer time horizons who are not looking to access their annuitized savings in the next few years.
Most annuities charge fees if you withdraw your principal before a pre-determined time (typically 5 to 7 years), which means that variable annuities are generally better-suited for investors with a longer time horizon. Similarly, some benefits might only be available if the contract is maintained for a specific period of time
If you’re uncertain about whether you have the appropriate time horizon for a variable annuity, it’s a good idea to speak with an advisor.
Finally, make sure to research the annuity company you choose. Any guarantees built into your annuity are contingent on the insurance company’s ability to pay them. In other words, because the stability of your payments depends on the stability of the insurer, we recommend working with a company that has a strong track record and a solid credit rating.
Get personalized help!
Contact us today to talk about your retirement goals and learn more about how to “pensionize” your retirement savings with an annuity.
Important Disclosures
The material provided by Augury Consulting. Augury Consulting is not affiliated with Creating Your Pension or United Planners Financial Services (United Planners). The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by United Planners.
To determine which investments may be appropriate for you, consult with your financial professional. Please remember that investment decisions should be based on an individual’s goals, time horizon, and tolerance for risk. Neither diversification nor asset allocation can ensure a profit or prevention of loss in times of declining values. United Planners does not render tax advice.
Securities and advisory services offered through United Planners Financial Services, member FINRA, SIPC. Pasquale Vitucci, CA Insurance Lic. # 0758212, is an Endorsed Agent of Creating Your Pension. Creating Your Pension and United Planners are separate and unrelated companies.
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