Annuities

If you’ve started thinking about creating income for retirement, chances are you’ve heard about annuities.

Annuities are arguably among the most misunderstood investments. They can be complicated, so it isn’t surprising. However, depending upon your situation, annuities could be an important part of your overall financial strategy. It’s our job as licensed professionals to share our knowledge and experience with you to help you decide for yourself.

Broadly defined, an annuity is a contract between you and an insurance company where the purchaser pays a premium in exchange for a variety of guaranteed payout options for a set period of time or for the remainder of his or her life. The two phases of annuities are the accumulation phase, where the contract value accumulates interest earnings, and the distribution phase, where income is paid out from the annuity.

Annuities are different than savings accounts, investments and other types of insurance policies because they are the only financial product that can guarantee income as long as you live. No money manager, stock, bond, ETF, mutual fund or REIT can do that. (The guarantees of an annuity are backed by the financial strength and claims-paying ability of the issuing insurance company.)

The basic idea behind these insurance products — a guaranteed stream of income, often for a lifetime — sounds pretty appealing, but before signing a contract, make sure you understand the pros and cons.

We can help you better understand annuities so you can determine whether they may be a good fit for your overall financial strategy. Call 301-588-0514 or email Jim.Musgrave@RFSAdvisors.com.