What is an annuity?

An annuity is a contract offered by insurance companies that allows you to accumulate retirement funds for retirement on a tax-favored basis (Only when you decide to withdraw your funds are your gains subject to income tax.) An annuity can, at retirement, provide a guaranteed income for the remainder of your life or for a specific amount of time (period certain).

Annuities are a savings vehicle that offers a guaranteed income for life. The insurance company calculates a guaranteed income payment based on your age, life expectancy and interest rates it will credit. That payment is guaranteed for as long as you live. Most insurance companies will also offer a guaranteed fixed rate of income for a specific period such as five to twenty years.

The guaranteed lifetime income may be based on your life only, or based upon the life of both you and a joint annuitant, typically your spouse. In the event of a joint annuitant, the monthly income from your fixed annuity will continue until the last survivor dies.

You can also benefit from an immediate annuity. If you find yourself in possession of a significant amount of money (an insurance settlement, inheritance, 401k payout, etc…) you may choose to purchase an Immediate Annuity. You can then start receiving regularly scheduled payments. The payments can be for a certain period or life.

There are many types of annuities. To learn more about this great method of letting your money work for you contact Kelly DeFord today.

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