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What Are Annuities? A Beginner's Guide to Retirement Income

Published May 13th, 2022 by Island Insurance Agency

Did you know that millions of Boomer babies retire each year?

Whether retirement is around the corner or far off, planning is essential. The sooner you can get started down the path of retirement income, the better. One of the best ways you can do this is through annuities.

Are you asking yourself, "What are annuities?" Keep reading to learn all about them with this beginner's guide to retirement income.

What Is an Annuity?

Put in the simplest terms, an annuity is a kind of contract between you and an insurance company. They can help you with reaching goals related to lifetime income, long-term care fees, legacy planning, and much more.

There are several different types of annuities, but they all require a long-term commitment. This shouldn't come as a surprise since the point is to have a safety net in the distant future. That's why you shouldn't take signing up for an annuity lightly.

Are you wondering which types of annuities are available to you?

Deferred Fixed Annuity

A deferred fixed annuity is one of the simplest and most popular options. This is an investment that offers you a guaranteed return rate. However, this guarantee is only viable for a certain period of time.

The good news is that taxes on your earnings are deferred and only kick into gear when you withdraw from that pool of money.

Fixed-Index Annuity

If you want a different option for annuity payments, then a fixed-index annuity might be for you. The main attraction of this opportunity is the fact that you can earn money from the stock market. Unlike usual investing, the risks involved are canceled out by the annuity provider.

Your provider does this by protecting the investment in the event of an index decline. Despite being associated with an index, most annuities of this kind don't come with dividends.

Keep in mind that you'll often get most of the profits from an investment, but not 100%. This is a fair trade-off for having the risk taken off your shoulders.

Variable Annuities

There's more of a risk with variable annuities, but there's also more of a potential pay-off. You could think of a variable annuity as an investment that has tax benefits.

While there isn't as much guaranteed retirement income, there's more wiggle room in terms of customization. This option is best suited to someone who will retire in the next few years and wants to make extra money.

What Are Annuities? Now You Know

Has a friend ever asked you, "What are annuities?" Now that you've learned all about them, you can explain the concept in detail. That way, you and your loved ones can have peace of mind about retirement.

Island Insurance Agency is proud to offer you annuities that are guaranteed to never lose money. In addition to amazing annuity plans, we can also provide you with life insurance that suits your needs.

To get a quote or ask us some questions, feel free to reach out.


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