Annuities are a series of financial tools receiving a great deal of attention recently. Despite the publicity, there are still a number of misunderstandings about annuities. Like, what they are and how they work. We’d like to address some of those questions. And, more importantly, give you a link to some resources to help you understand annuities and the role they can fill in your financial life.
What are Annuities?
In their most basic form, annuities are an agreement between you and a life insurance company. This agreement provides a steady stream of regular income over your lifetime in exchange for a lump-sum premium or series of premiums you pay to the insurer. Within annuities, there are two varietals: immediate payments made at the beginning of the contract called an immediate annuity or payments made in the future called a deferred annuity. It’s important to remember annuities are not a “one size fits all” product. Rather, they come in a number of sizes and shapes fitted to individual consumers.
Likewise, you may have heard a variety of conflicting reviews about annuities. Again, there is no one solution that works for everyone. You’ve heard both positive and negative assessments of annuities. Therefore, their value is greatly contingent on your individual situation and your personal goals. Because of this, an experienced financial adviser can help you decide which is best for you. Different kinds of annuities can have different effects on your finances and your financial needs.
- Fixed annuities generally provide a guaranteed rate of return for a per-defined period. This rate is determined by the issuing company based on their projections for market conditions. Both at the time of issue, and for the future. Most fixed annuity contracts include a guaranteed rate of return. Moreover, fixed annuities offer the possibility of tax-deferred growth depending on the annuity and the arrangements for payment.
- Variable annuities shift the responsibility for growth to the annuity holder. You as the owner of the annuity select your own investment options. This is done by selecting from a group of portfolio types offered by the insurance company called “separate accounts”. For example, these may include money market funds, stocks, bonds, or other financial instruments. The value of the individual annuity and the payments therefrom will depend on the performance of the relevant financial instruments selected by the annuity’s owner. Results will vary depending on the choices made and market performance over the duration of the annuity.
When selecting an annuity, it is vital you get the best advice you can from experienced professionals. Professionals personally invested in your fiscal success. OmniStar Financial remains firm in our support of our clients by illuminating the blind spots and helping them plan for their financial futures. Get in touch with us. We will guide you through these times of uncertainty. Reach out and make an appointment today and we’ll start your personal journey to success.