The various types of annuities, including income or index annuities, can be confusing for many people who are looking for more security in retirement. At Esure Annuity, our primary objective is to inform and educate those in Phoenix regarding the various types of annuities so that you can make an informed decision. Ultimately, there are several basic types, which include index, tax-sheltered, variable, immediate, and single premium deferred. Below, we will discuss and income annuity and index annuity.
What are income annuities? Basically, this type of annuity is annuitized or converted into a series of periodic income payments right away, although the income payments may fluctuate over time depending on whether the income units are fixed or variable investments. In most situations, an income annuity is purchased by those who are nearing or already at retirement age, and who wish to receive their money in a lump sum payment, rather than over time.
What is an index annuity? Before investing in an indexed annuity, it is vital to understand precisely what you are purchasing. Essentially, this type of annuity is a contract issued and guaranteed by an insurance company, whereby the money you invest (premium) is protected 24/7/365 in the event of down markets. Your accumulation value can increase when the market increases, but there is never a loss when the market falls. Your growth potential is linked to an index that you choose, like the S & P 500 index, the Barclays Dynamic Balance Index, or the Dow Dividend Aristocrats Index. Ann index annuity may guarantee a higher level of lifetime income in two ways: using an income rider, which are optional, or annuitizing and converting to an immediate annuity, also optional. Index annuities are secure retirement assets that are regulated by each state insurance department for legal reserves. They are not securities, and therefore are not regulated by the SEC (Securities and Exchange Commission) or by FINRA (Financial Industry Regulatory Authority) It is important to note that this type of annuity is regulated by state insurance departments. Annuities are not bank instruments and are not FDIC insured, however, it is important to note that the companies who issue them have been in business for decades who have never lost a penny through world wars, depressions, 9-11 and 2008. Index annuities have been very safe and secure since their inception in 1996.
At Esure Annuity, we know that with any type of investment, there are advantages and drawbacks. With an index annuity, there are certain disadvantages including zero-interest crediting during a down year, that fact that these types of annuities are not insured by the FDIC, and should you withdraw your money before you are 59 1/2 years old, you may be subject to a 10% penalty by the IRS. However, there are many advantages with all types of annuities as well, so it is vital you choose a professional who is experienced and can help ensure you choose the right type of annuity for your particular needs.
Have questions or need more information regarding income or index annuities? At Esure Annuity, we take the confusion out of making smart decisions for your retirement future. Give us a call today, and let us help you make sense out of the various types of annuities.
