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3 Different Annuity Strategies

As part of your diverse portfolio, an annuity can help you accomplish financial goals such as saving for retirement or protecting your assets. Consider these three different annuity strategies.

Fixed Deferred Annuity vs. Certificate of Deposit

Both of these investments are considered low-risk. A CD is typically used for short-term accumulation of savings. A fixed deferred annuity is generally used for long-term savings, such as retirement. Interest rates can vary with CDs when it comes to renewing them, but with a fixed deferred annuity, you are guaranteed a minimum interest rate regardless if rates drop because of market conditions. With a CD, you are taxed in the year that interest is earned, but with a fixed deferred annuity, you don’t pay tax until money is withdrawn and usually at a much lower rate.

Variable Annuity for Long-Term Tax-Deferred Growth

Variable annuities offer a variety of investment options. The value of this annuity varies according to how the investment options that you have chosen for it perform. A variable annuity includes a death benefit that guarantees a specified amount to your beneficiary if you were to pass away before your payments began. This annuity is tax-deferred; however, once you begin receiving payments, you are taxed at the ordinary income tax rate instead of the lower capital gains rates.

Immediate Annuity for Income Purposes

With an immediate annuity, you pay your insurer a lump sum of cash, for which they will give you regular income payments in return for the rest of your life. These payments begin immediately and are often used by people who are already retired. There are several advantages to this type of annuity, including being able to depend on a guaranteed income stream each month and preventing retirees from outliving their savings. As the aging population grows and life expectancy increases, immediate annuities appeal to more and more retirees.

Does an annuity fit into your retirement planning? The answer depends on your personal finances and your current strategies. Schedule your complimentary consultation today.

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