Annuity Questions
Straight answers about annuities, retirement income, and replacing a contract you already own.
An annuity is a contract with an insurance company. You provide money, and the company agrees to terms that can include growth, income, or both. Some annuities can pay income for life. Annuities also have fees, surrender charges, and limits on access to your money, so the details of each contract matter.
Sometimes, but not always. A newer contract may offer different income or features, yet replacing one can bring surrender charges, taxes, and new fees. A side by side comparison of both contracts, including costs and limits, helps you see what you would gain and what you would give up.
Start with your most recent statement. Look at what you pay each year, how long surrender charges last, what income benefit you have, and what that benefit pays. Comparing those points with current alternatives shows whether your contract still matches your goals.
A surrender charge is a fee applied if you withdraw more than the contract allows, or end the contract, during a set period. It usually declines over time. Ask for the surrender schedule in writing before you buy a contract or move to a new one.
An income rider is an optional benefit on some annuities that sets terms for lifetime withdrawals. It typically carries an annual fee, and the income it provides depends on the contract rules. Review the fee, the withdrawal terms, and any restrictions before relying on it.
An account balance is the value of your savings, and it can rise and fall with markets. Retirement income is the money you can count on receiving each month. Knowing how much of your essential spending is covered by income sources you do not have to manage helps you plan with more clarity.
Add up your essential monthly expenses and subtract dependable income such as Social Security. The remaining gap is what you may want to cover. Options include annuities, bond ladders, and systematic withdrawals from investments. Each involves tradeoffs in cost, flexibility, and risk, so compare them before choosing.
It is the risk that poor market returns come early in retirement, while you are taking withdrawals. The same average return can produce very different results depending on when the bad years occur. Some people cover essential expenses with a dependable income source and keep the rest invested.
Prices tend to rise over time, so a fixed monthly amount buys less each year. Over a retirement that may last 25 or 30 years, the effect can be large. Some income options include features meant to help with rising costs, usually in exchange for lower starting income or added fees.
Many people plan for about 20 years, but a healthy couple may see one spouse live into their 90s. Planning for a longer retirement helps reduce the chance of outliving your savings. Your health, family history, and spending needs all matter.
Common types include fixed annuities, fixed index annuities, variable annuities, registered index linked annuities, and immediate annuities. They differ in how returns are credited, how much market risk you take, and what fees apply. Each has limits on access to your money, so understanding the differences before you decide is important.
In general, the earnings portion of an annuity is taxed as ordinary income when withdrawn, and withdrawals before age 59 and a half may face an additional tax. Rules differ for annuities held in an IRA and those bought with after tax money. Please consult a tax professional about your situation.
It depends on the contract. A beneficiary may receive the remaining value or a death benefit, and income payments may end or continue depending on the payout option you selected. Taxes may apply to the beneficiary. Review the death benefit terms of your contract carefully.
Annuities can carry fees, surrender charges, and limits on withdrawals. Guarantees depend on the claims paying ability of the issuing insurance company. Index products may limit how much of a market gain is credited. Income may not keep pace with inflation. Contracts can be complex, so read the terms and ask questions.
You upload your current annuity statement, and you receive a side by side comparison with newer alternatives, including fees and limitations on both sides. The comparison is for educational purposes and is not a recommendation to buy or replace any contract.
Upload your statement at MaxMyAnnuityIncome.com or call (234) 4-INCOME to see a side by side comparison.
Upload My StatementAnnuities have fees, surrender charges, and limitations. Guarantees are based on the claims paying ability of the issuing insurance company. This information is educational and is not a recommendation to buy, sell, or replace any product.
Securities offered through Vanderbilt Securities, LLC, member FINRA/SIPC.