Delaware Finance

Jul 4 2018

What is an annuity, Vanguard, what is a annuities.#What #is #a #annuities


What is an annuity, and is it right for me?

Annuities offer benefits that other retirement accounts can’t. They can help replace your paycheck in retirement or give you another tax-advantaged way to save for retirement.

What are annuities?

Annuities are a type of investment account typically used for retirement savings or to generate regular income payments in retirement. Annuities are insurance contracts, and the issuing insurance company provides some type of guarantee on your investment.*

There are many types of annuities, and the right one for you depends on your goal.

If you’re looking for income in retirement

Consider income annuities. Income annuities can provide a stable and secure source of retirement income. With these types of annuities, you surrender future access to a portion of your savings in exchange for a stream of income that’s guaranteed for life. Payments from income annuities can typically start as early as 30 days from the day you sign the contract, as late as your 85th birthday, or on any date in between.

Consider a deferred variable annuity with a lifetime withdrawal benefit. Deferred variable annuities with lifetime withdrawal benefits offer a way to safely draw down your retirement assets by guaranteeing that, at a minimum, you will be able to withdraw a set percentage of your savings for the rest of your life. You retain access to your savings throughout the life of the annuity, and since the money is invested in a portfolio of stock and bonds, you have the opportunity to grow both your principal and your income stream over time.

If you’re still saving for retirement

Consider deferred annuities. The money you invest grows tax-deferred, so you won’t owe taxes on your earnings until they’re withdrawn. Depending on the annuity, you can invest in portfolios covering all the major asset classes giving you a chance at long-term growth or lock in a specific interest rate so that you know exactly what you’ll earn.

What should I think about when shopping for an annuity?

An annuity definition is only one thing you’ll need to know. There are many issues you’ll need to think about before you purchase one, like:

  • What the fees and charges will be. Your costs can have a big impact on the performance of your annuity, and costs vary widely among different companies.
  • Who issues the annuity. Annuities are insurance products, and the issuer is responsible for the guarantees it makes to you. Look for stable, responsible companies that are highly rated.
  • How you want your annuity invested. With a fixed rate, you know exactly what your annuity will earn every year. Variable annuities offer access to portfolios covering all of the major asset classes, with the potential for earning a market return.
  • How much flexibility you need. Income annuities can provide secure, stable income but offer little if any access to your savings. Deferred annuities with lifetime withdrawal benefits typically provide a lower guaranteed income but offer greater access to your investment.
  • If you’re looking for an income annuity, how long you want your payments to last and when you want them to begin. Some income annuities offer the option of receiving payments for your lifetime or for a fixed number of years. Typically, payments can start as soon as 30 days from purchase, as late as your 85th birthday, or on any date in between.

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*Product guarantees are subject to the claims-paying ability of the issuing insurance company.

Investments in bond funds are subject to interest rate, credit, and inflation risk.

Deferred variable annuities are long-term vehicles designed for retirement purposes and contain underlying investment portfolios that are subject to market fluctuation, investment risk, and possible loss of principal. If you take withdrawals from a variable annuity prior to age 59 , you may have to pay ordinary income tax plus a 10% federal penalty tax.

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