People are living longer and that means more time and savings will be spent in retirement. If you need a tax-deferred product to provide a guaranteed1 stream of income for life 2 or a specified number of years, it might be worth considering a fixed annuity. An annuity is a contract between an insurance company and an annuity owner. In exchange for a purchase payment, or series of payments, the insurance company guarantees1 to pay a stream of income in the future.
There are two types of annuities—Immediate and Deferred.
An immediate annuity is usually purchased with a single premium and begins a stream of income within the first 12 months from the date of issue. You decide when payments will begin within that period and how long to receive income.
- Immediate Fixed Annuity
An immediate fixed annuity provides a guaranteed and predictable stream of income during the payout period.
A deferred annuity is specifically designed to help accumulate assets for retirement. It also offers the ability to turn those assets into a guaranteed stream of income at some point in the future. You decide when payments begin and how long to receive income.
- Deferred Fixed Annuity
A deferred fixed annuity earns interest during the contract's accumulation period. The interest rates are set by the issuing company and are guaranteed not to be lower than the minimum guaranteed interest rate shown in the contract. A contract's accumulated assets can be converted into a guaranteed stream of income for the future.
1 Guarantees are based on the claims-paying ability of the issuing company.
2 One would need to annuitize and select a lifetime payout option in order to receive income they can’t outlive.
Annuities do not provide any additional tax advantage when used to fund a qualified plan. You should consider buying an annuity to fund a qualified plan for the annuity's additional features, such as lifetime income payments and death benefit protection.