Annuities are contracts with an insurance company. You give them a sum of money in exchange for certain promises and guarantees. In the hay day of the mutual funds in the 1990’s annuities were maligned and misrepresented. Annuities today are still misunderstood but in the hands of a competent advisor they can be a powerful solution in a retirement plan.
Annuities come in different shapes and sizes and no one fits all. Annuities can be broken down into two categories – immediate and deferred. Immediate simply means that you trade a sum of money for benefits now while a deferred annuity is placing a sum of money for future use. You can usually add to deferred annuities whereas immediate annuities are single premiums. Immediate and deferred annuities are then classified as fixed annuities which include immediate, fixed period certain, and fixed index annuities. Deferred annuities are usually variable annuities and flexible premium fixed annuities.
Sounds complicated? It can be and that is why a competent Financial Advisor is important. Look for professional designations and experience in the financial industry when choosing a Financial Advisor. Among others (see bio) I hold the professional designation of CAS® which is the Certified Annuity Specialist awarded by the Institute of Business and Finance. I have held that designation since 2009.
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