{"id":22582,"date":"2015-04-23T01:20:00","date_gmt":"2015-04-23T01:20:00","guid":{"rendered":"https:\/\/www.annuityfyi.com\/?page_id=22582"},"modified":"2022-12-16T16:45:15","modified_gmt":"2022-12-16T16:45:15","slug":"finding-the-right-annuity","status":"publish","type":"page","link":"https:\/\/www.annuityfyi.com\/guides\/finding-the-right-annuity\/","title":{"rendered":"Annuities: Find the Right One For You"},"content":{"rendered":"
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Annuities are an excellent way to generate lifetime income, save for retirement without the worry of market risk, and leave something to your family or a favorite charity after you die. However, like many financial products, where was once a marketplace with a few simple products there are now a diverse and confusing array of products and features. The upside of this is that consumers have a lot more choice, and products that are much better suited for specific needs. In this article, I outline the five main types of annuities: fixed-indexed, variable, fixed, immediate, and deferred income. I will also suggest what to look for in each, as well as what questions to ask before you invest.<\/strong><\/p>\n\n\n\n

Fixed Index Annuities<\/strong><\/h4>\n\n\n\n

A fixed-indexed annuity, also often referred to as a hybrid annuity, is an annuity that grows in value according to a specified market index. This value is referred to as the cash accumulation value, and what investors think of as their account value. While the standard index is the S&P500, there are many other index choices, including blended indices. The insurance company that issues the fixed-indexed annuity may also guarantee you a minimum return, the amount of which will vary from one insurance company to the next. Most fixed-indexed annuities have caps on the index gains, although there are some that do not (as of this writing we know of three without caps, and index gains credited to the cash value are averaging 5% per year). The prevailing interest rates at the time of purchase have no effect on this type of annuity.<\/p>\n\n\n\n

The most important benefit of a fixed-indexed annuity is the single or joint guaranteed lifetime income benefit rider. The amount of lifetime income you can receive is based on a value called the income benefit base. This is not the same as the cash accumulation value or the account value think of it more as a reference number used solely for the purpose of calculating lifetime income when and if you are ready to take it. The insurance company typically guarantees some minimum compounding increase each year to the income benefit base. You can calculate to the penny the minimum amount of guaranteed lifetime income you will receive based on various ages at which you may start taking lifetime income. This is extremely useful for retirement planning and financial piece of mind.<\/p>\n\n\n\n

The withdrawal rate from the income benefit base is typically higher than with a variable annuity. The income may begin at any time, immediately or in the future, and does not require a specific age to be declared on the application like a deferred income annuity. The owner may chose income in an annual lump sum, and may have income electronically deposited into a checking or savings account on a regular monthly basis.<\/p>\n\n\n\n

It is important to note that lifetime income with a fixed-indexed annuity is not annuitization<\/em>. The huge difference is that lifetime income allows the owner access to the accumulated cash value, which continues to be credited gains, even subsequent to consistent income withdrawals. Cost of living adjustments are also available.<\/p>\n\n\n\n

There are no fees for a fixed-indexed annuity itself, but any additional riders, such as a guaranteed lifetime withdrawal benefit, comes at an additional cost, typically 0.75% to 1%. With this type of annuity, one can either make a one-time premium deposit, or a series of premium deposits from different sources and at different times. Many have bonuses added to premium deposits, which are typically 5% to 10%. The principal, bonus, and all gains are protected and will never lose value.<\/p>\n\n\n\n

Here are some additional benefits of a fixed-indexed annuity:<\/p>\n\n\n\n