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How Annuity Works

What is an Annuity?

An annuity is a legal financial agreement between one or more persons and an insurance company. By providing payments to the insurance company now, the company in turn agrees to distribute regular income deposits to the individual(s) at some agreed upon future-time, typically after retirement or after the age of 59 and a half.

What are annuities' greatest appeal? Making this type of an investment ensures a consistent stream of income that the annuity holder cannot outlive. For retirement purposes, this quality makes variable annuities an extremely attractive investment for those planning ahead. The accumulated money gained inside this agreement are compounded tax deferred annuity gains- a highly desirable trait. The IRS can impose a 10% penalty when annuity holders withdrawal from their account before they have reached the agreed upon time (usually, age 59 1/2). Other charges and penalties may be imposed for complete early withdrawal or for other infringements on the signed structured settlement annuities.

Another important note about understanding annuities is that although they are investment contracts, they usually contain a number of features similar to an insurance policy. Typically, this includes certain factors, such as a minimum guarantees or specified death benefits.

Which annuity is right for me?

The first thing you need to be sure of is that before you can purchase an annuity, you must have a fully funded (or have the intention to fully fund) your current IRA or 401(k) for the year. Because these investments are made before tax, completing their funding is the first step to consider which annuity is right for you.

When you have additional funds to put into investment after your retirement planning, you have a number of options to consider. Will you place that money in mutual funds, bonds, annuities, or another investment location? What is annuities' benefit over other types of investments or plans like reverse annuity mortgage, and what is an annuity type that works for me? Those are the kinds of questions you should be asking yourself and that your advisors at CW Gibson can help you with. The tax sheltered annuity benefits mean that you can invest unlimited funds without paying taxes until you start your withdrawals. You can even use your investment as a way to fund your other retirement plans, such as your IRA. The right type of annuity will depend significantly on your current financial situation. Who do you want to be covered under your agreement? A single life annuity (straight life annuity) provides payments to just one individual which cease after death, while other joint annuities will continue payments to listed beneficiaries. Should you purchase a fixed rate annuity or one with variable annuity rates? Immediate annuity, variable annuity or lifetime annuity? The benefits of each type of investment will depend on when you want to withdraw money, how you want to withdraw it, how you want it to be taxed, who will be covered and how you want to pay for it. Please visit our Types of Annuities page to learn more about the different forms of investment. Make an appointment today to discuss your annuity investment options with a retirement finance advisor at CW Gibson.

Annuity Companies

Once you've decided to purchase an annuity, the next consideration is who to purchase it from. In the United States, there are almost 2,000 insurance companies that offer retirement annuities to their customers. Some of the top providers include: Symetra annuities, Swiss annuities, Riversource annuities, New York Life, AIG, John Hancock, Mass Mutual, and others. Be sure to research each company carefully and compare their offers with other group's annuity options. For example, a Riversource variable annuity may offer more competitive rates than a Symetra variable annuity and earn you significantly more over time. A key step in the annuity process is finding a company you trust and that works well with your situation.

To learn more about variable annuity comparison and how to research the best company and annuity for you, please visit our Compare Annuities page or make an appointment with an investment advisor today.

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.

Contact C.W. Gibson

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

 

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We meet and consult with clients on an appointment-only basis. Please call or email to schedule your consultation ahead of time. First time visitors receive an initial 30 minutes consultation for free. Call (208) 447-2218 for more information.