Annuities are distinct from other financial vehicles because they are an insurance product. They’re ideal for those who take a more conservative approach to investing and feel more comfortable with something that offers concrete guarantees rather than possible diminishing returns.
How Do Annuities Work?
When you purchase an annuity, you can choose between immediate and deferred. Immediate annuities dispense a steady stream of income for a given number of years, or a lifetime, within a year after a lump-sum purchase. Deferred annuities require making a series of payments for a number of years (known as the accumulation phase) before you receive funds (which is the annuitization phase).
Payments can be disbursed on a monthly, quarterly, semi-annual, or annual basis.
How Will An Annuity Grow My Investment?
This depends on the type of annuity you choose, depending on your risk tolerance:
- Variable – amount received in scheduled payments vary according to market performance; highest risk and reward
- Fixed – grow based on fixed rate rather than stock market performance; guaranteed returns, but has the most modest rate of return
- Fixed-Index – guarantee a minimum payment amount, with slight variations according to market performance; this is for those with a medium risk tolerance
Why Should I Get An Annuity?
Annuities offer a promise. No matter what, as long as you pay the premiums, you are guaranteed a steady income stream. It adds valuable financial security at a time when your only other income comes from Social Security. Annuities are the perfect complement to fixed income, as you’re no longer forced to abide by a tighter budget or worry about burning through your hard-earned savings during retirement.
There’s something for everyone. If you’re older and need immediate income, you can opt for the single-premium immediate annuity (SPIA) and get your guaranteed routine payments within a year in exchange for one large payment. For younger individuals who can set aside a portion of income, a deferred annuity is ideal, as it’s paid for in smaller increments over a longer period, up until the time the individual is scheduled to receive payments.
Annuities also satisfy the risk-tolerant and risk-averse, as they come in types such as variable, fixed, and fixed-index. You can choose how much of a role the market plays in your returns or whether the market is a factor at all.
Strengthen Your Portfolio Today
At Hometown Financial Group, we will help you diversify and strengthen your portfolio. Annuities are a great fit for anyone looking to add more security to their retirement. No matter where you are in your retirement journey, we are here to help you achieve financial freedom and prosperity, and it all begins with one phone call. Call us today at (919) 887-1236.