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Compare Annuities

Individuals come from all sorts of financial backgrounds and situations and the various annuities available are designed to meet those diverse needs. Making the comparison of different annuities and choosing the one that best meets your goals is of course a major part of the purchase process. For those clients who are relatively young and are looking for an early way to start planning for your retirement savings, chances are a deferred annuity agreement, which collects deposits with tax-deferred interest like an IRA, will suit your needs best.

For those getting close to their retirement, an immediate annuity, which allows for immediate access to interest gains, is most likely the best option. Once you've given some thought to your situation and decided on a deferred or immediate annuity, the next step is to decide whether variable, fixed, or indexed annuities are best for you.

Things to consider before making annuity comparisons

Before going through the comparison process, thinking about whether you actually need an annuity is essential. Other retirement options should be considered first, especially for young professionals who have a long time until retirement. Retirement plans such a 401(k) or a Roth IRA give investors the best control over investments as well as much greater flexibility and overall provide more benefits through taxes and room for growth. Because of these benefits, young professionals planning for retirement should not be thinking about annuities until your 401(k) has been maxed out or another situation makes an annuity more beneficial. Other situations may include coming into an inheritance, if you are considering going into early retirement, or if you want to protect your money from other litigation.

Comparing the Types of Annuities

Once you've established that purchasing an annuity is in your best interest, you'll need to determine the right kind for you. That will mean choosing from variable, fixed, or indexed annuities.

Variable Annuity

A variable annuity is considerably more risky than a fixed annuity, but the returns can be greater. These types of annuities are typically more appealing to investors in the pre-retirement phase looking for a high-growth investment. A variable annuity works best for individuals who have a high risk tolerance and can financially deal with the possibility of market fluctuations and potentially going into the negative. Because the market can be so unpredictable at times, insurance companies cannot offer a guarantee for this type of annuity. Because of fluctuations, this type of annuity is also best suited for a deferred withdrawal because it works best at building overall wealth, not producing a steady stream of income.

Fixed Annuity

A fixed annuity guarantees the investor a specific rate of return when you make the purchase, and your investment will continue to grow at that rate for the duration of your ownership. Although the return may be more modest, it offers superior security against market fluctuations, meltdowns, and it is widely considered one of the safest methods of retirement investment.

Index Annuity

An index annuity offers the best of both types, allowing investors to play the market for growth while still protecting their initial investment. For this annuity, your rate of return follows one of the reliable market indices of investment growth and still offers a guarantee minimum return.

Other features to consider and compare

  • Protecting your cost of living. By adding an additional fee to your purchase, you can also protect your regular income payments from inflation by accounting for increases in the cost of living. You may or may not find this feature pertinent to you and you should consider how your other retirement funds can mitigate rises in costs of living and inflation.
  • Joint benefits and other beneficiaries. Some individuals may wish for their annuity to cover their surviving spouse after their death, while other couples who have both worked all their lives may already have individual annuities that don't need to be extended to their surviving partner.

Disclaimer: C.W. Gibson Financial is listed with the State of Idaho as a Registered Investment Advisor. This firm does not accept or solicit business in any state which it is not registered or otherwise qualified to conduct business by virtue of a state "de minimus" exemptio. We will never collect financial information from clients online. Any personal or financial information required will be collected in person at the firm's local office. While our firm may promote certain government services, we are not an agent of the state or federal government.

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611 W Grove Ave. #100
Boise, ID 83702
Call: (208) 447-2218

 

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