Variable Annuities – Guaranteed Income & Real Growth Potential

Below we explore the benefits of variable annuities and show why so many financial advisors recommend them to their clients. 

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Annuity Basics

There are two main types of annuities: immediate and deferred.

An immediate annuity forms through a single, one-time, premium payment that fully loads all investment funds making all the benefits of the annuity immediately available.  Immediate annuities are for individuals who have a large lump-sum to invest and/or are looking for an immediate source of income.

A deferred annuity forms over-time through a series of premium payments. Benefits of the annuity being when after completion of all scheduled premium payments.  They provide a convenient way to build up your retirement income without straining your monthly budget.

Interest Rates

Both immediate and deferred annuities have interest rates that grow your investment.  There are two types of interest rates to choose from.

Fixed-Rate Annuities provide a fixed interest rate that guarantees the growth of your investment funds.  These investments protect your funds from market exposure and supply a conservative guaranteed rate of growth.

Variable Rate Annuities provide a variable interest rate based on market fluctuations. These investments allow higher gains and greatly help individuals who are behind on their retirement savings.

Variable Annuities vs. Fixed Annuities

Fixed annuities focus on protecting your funds by shielding your investment from market exposure and provide a conservative interest rate to outpace inflation.

Variable annuities, on the other hand, focus on growth and increasing your retirement income.  In a strong economy, these investments can provide significant returns and greatly help individuals who are behind on their retirement savings.  

Compared to fixed-rate options, variable rate annuities have historically offered greater returns. Though variability exists, over timeframes of 10 or more years, market fluctuations give way to consistently higher growth.  

Variable rate annuities continue to grow in popularity.  In 2019 sales climbed 8%, higher than any other annuity type. 

Benefits of Variable Annuities

• Flexible design options
• Opportunity for significant growth
• Protections that guard against loss & market exposure
• Options for lifetime income
• Deferral tax advantages
• Penalty-free withdraw allowances

Variable Annuity Tax Advantages

Variable-rate annuities offer substantial benefits over other investment vehicles that get taxed year-over-year at ordinary income rates, such as mutual funds, money markets, bonds, and CDs.

With a variable annuity, you can delay your tax obligation until you begin taking income distributions in the future.  At that point, you also control how much income you withdraw and therefore have greater control over the income tax rate that you pay.  Over the long term, this tax benefit can add up to significant savings.  

Potential Risks of Variable Annuities

Variable rate annuities carry investment risks just as mutual funds do. If the annuity investment performs poorly, your investment may produce zero growth or even suffer the principle loss. However, keep in mind that annuity investments are long term investments. And as mentioned above, even though fluctuating years, overall, the market continually produces higher growth.

Shopping Carriers and Finding Your Best Opportunity

While there are plenty of carriers to choose from, not all carriers provide the same annuity products.  Interest rates, design options, and payout features can vary greatly between companies.  Smart shoppers will take the time to compare their options before investing.

Our independent agency is here to help you do just that. We help you shop and compare all the top-rated carriers and their products side by side.  As a result, you save time now and have more income later!

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We’ve helped thousands of people earn more income throughout retirement by finding the best annuity products.  Explore your options today with a free variable annuity illustration. Fill out the form on your screen to get started.