What is an Annuity?
An annuity is an insurance product that pays out income, and can be used as part of a retirement strategy. Annuities are a popular choice for those who want to receive a steady income stream in retirement. We recommend Fixed Annuities to our clients so that your money is guaranteed to grow without the risks associated with the markets.
Buying Fixed Annuities For 2020s
2020s has seen a huge flight to safety into Indexed Annuities with the recent 30%+ correction in equities, 25-year interest rate highs, geopolitical war risks, supply chain woes, and 40-year high inflation with the necessities of life. Stock market losses hurt more than market gains help. In markets like we’re experiencing right now, your clients would need a return greater than the loss to get back to the investment’s original value. That means if a 10% loss is followed by a 10% gain, you still carry a loss. You would need an 11% return to fully recover. As losses increase, your money needs to work even harder — just to break even. Consider a strategy built to protect your clients’ portfolios from continuing market declines, and provide income for life.
With indexed annuities from Elkin Insurance, you have crediting strategies designed to provide 100% downside protection to give your clients peace of mind and offer market upside returns to keep pace with this record inflation that lock gains in every year that can never be lost. Because you’re safeguarded from market losses, even small gains will keep your client’s money growing and working toward their income goals.
Reasons for Buying Fixed Annuities
Annuities can provide an incredible safety net. Older investors are particularly drawn to annuities as the threat of outliving their money from retirement accounts is a significant risk. Annuities can provide a guaranteed income stream for life, along with guarantee of principal. Think of the annuity like building your financial future upon a solid unmovable rock foundation.
In the past, people believed that annuities were for only wealthy individuals or families with a need to either shelter assets or ensure that large amounts of income would be guaranteed. But, alas, insurance companies are successfully marketing annuity products to middle and lower class families who also need to ensure that income continues in retirement. This is especially true as life expectancy for both men and women has increased dramatically of the last 40 years. Annuities are really the only investments that provide options for guaranteed income, a guaranteed return or a guarantee of the Principal.
There are several variations and countless products to choose from, however they all share these common traits:
Tax Deferred Growth: The taxes on the growth of an annuity are deferred. This in essence gives you a better rate of return than some other investment products, because the income that you would have paid in taxes is still working for you.
Principal Guarantees: The safety offered with fixed annuities is perhaps the most important feature to most consumers. As long as you follow the contract rules, and the insurance company remains in good standing, the fund put into an annuity are never at risk.
Fixed, Competitive Interest Rates: Typically speaking, fixed annuities usually offer a higher interest rate than similar products, such as a bank CD or a money market account.
Types of Fixed Annuities:
Traditional Fixed Annuity
The traditional fixed annuity is structured very similarly to a bank CD (certificate of deposit). The premium grows at a guaranteed fixed interest rate for a set amount of time. The length of the contract can range anywhere from one year, to as long as 15 years.
Fixed Indexed Annuities / Equity Indexed Annuities
Fixed Indexed Annuities, also referred to as Equity Indexed Annuities, provide the same principal guarantees of a traditional fixed annuity, however the rate of return is based on the performance of an index, such as the S&P 500. The insurance company will credit the account with a portion of the indexes upside growth, while offering protection against downturns in the market.
Immediate Annuities convert a lump sum amount of money into guaranteed income to the annuitant as soon as the annuity is purchased. The annuitant may choose from a lifetime income stream, which provided the income for life, or a set time frame (usually 5, 10 or 20 years).
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