Retirement planning has changed a lot over the years. In the past, retirees often received company pensions that would provide them with a yearly income for as long as they lived. It used to be simple. But nowadays, employer provided pensions are not nearly as common, so that leaves employees in need of a retirement plan that provides the ease and security that used to come from traditional pensions. That’s where annuities come in. Annuities are financial investments that can be used to help build a stream of income over time. You exchange present contributions for future income payments. There are two main types of annuities to choose from. Fixed and variable, fixed annuities ensure that you receive a minimum payment every year, providing you with a base level of income from the contract annually. They offer you a fixed interest rate completely unrelated to the performance of any market or index. They are the safer option because you obtain at least the minimal income that is guaranteed during less prosperous years. Variable annuities are riskier. Your income to vary based on investments. So if the performance of your investments is negative, this can result in you losing money in your annuity. But if your investments do well, your money will grow quicker and you’ll receive more money in the future. There’s also something called a fixed indexed annuity or FIA. With a fixed index annuity, you get a tax deferred set rate of return that benefits from the upside of a stock market index. without the risk. Of losing money during negative market performance. In short, although there are many different variations of annuities, they all have one thing in common. They provide a stream of payments that can last for the rest of your life. That makes them an ideal way to create a guaranteed income in retirement. However, before you commit yourself to an annuity of any kind, it’s best to schedule an appointment with your financial advisor to review your options and see which type of annuity is best for you.
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