Accumulate wealth without incurring market risk
Generate stable, predictable retirement income
Achieve Accumulation and Cash-Flow Goals With
Annuities are issued by life insurance companies and purchased in the form of “contracts.” Two broad categories encompass all annuity types: accumulation annuities and payout (or income) annuities.
Common benefits of annuities include:
- Tax-deferred growth
- Access to all or a portion of funds
- Flexibility in the event of certain needs or circumstances
An annuity is categorized as “fixed” by the fact that the contract value does not change with outside factors, such as the stock market or bond market. By contrast, a “variable” annuity’s value does fluctuate with changes in the markets.
Accumulation Fixed Annuities@headingTag>
Individuals seeking long-term conservative growth with the advantage of tax deferral fit the typical profile of accumulation-annuity buyers. They seek an attractive rate of return but do not wish to expose their money to value fluctuations associated with traditional equity or debt instruments (stocks, bonds, mutual funds, etc.). Accumulation annuities vary by the way in which interest credits are applied. Interest credits may be based on a one-year renewable fixed rate, a multi-year rate that applies for several years, or on the positive results of a market index, such as the S&P 500® Index.
The key is, the contract value changes only by the addition of index credits, and will never go down in value. Accumulation annuities are differentiated by a variety of attributes, including: the ability to add premium after the initial purchase, maximum issues ages, minimum premium amounts, crediting options, length of surrender-charge schedules, premium bonuses, withdrawal options, and a variety of riders.
Payout (income) Fixed Annuities@headingTag>
Fixed annuities are an effective vehicle for providing the owner with income, and are popular among retirees. Income can be generated in several ways. An immediate annuity pays a guaranteed and specified cash flow comprised of both principal and interest for a selected period of time – which may be for the life of the owner(s), or a specified period of time. Upon the death of the owner(s), immediate annuities have no residual value. Income can also be derived from accumulation annuities, either through annuitization of the contract, or by way of an income rider.