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Annuity FAQ’s

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Annuity FAQs

Planning for retirement and trying to anticipate the financial future requires attention to detail, an understanding of one’s current saving capacity and future costs, as well as knowledge of different types of savings accounts, insurance plans, Social Security benefits, etc. For many individuals, an annuity makes sense in addition to retirement savings accounts. 

At Top Investment Solutions, we can answer your questions about annuities. Consider some of the answers to a few of the annuities FAQs (frequently asked questions) we hear most, and reach out to us directly for more information.

What Is an Annuity?

As defined by Investopedia, an annuity is a type of insurance contract that is distributed by a financial institution. Per the terms of the annuity contract, the investor/annuity holder pays premiums either in the form of monthly premiums or a lump-sum payment, and the financial institution pays out funds in the future for a specified amount of time. The purpose of an annuity is to provide a guaranteed stream of income in the future. 

What Are the Different Types of Annuities?

There are multiple different types of annuities. These include:

  • Variable annuities—In a variable annuity contract, the value of the annuity can vary based on the value of underlying sub-accounts portfolios.
  • Fixed annuities—In a fixed annuity, the annuity is protected against loss, and a fixed rate of return is offered. 
  • Fixed-index annuities—In a fixed-index annuity, the returns of the annuity are based on the performance of an underlying portfolio, but the money is never directly exposed to the stock market. 
  • Immediate annuities—This is the most standard type of annuity where the annuity holder makes a lump-sum payment that’s converted into a stream of income for a fixed amount of time in the future. 

Who Benefits from an Annuity?

As mentioned above, many people have annuities as part of their retirement plan and may have an annuity in addition to investments in a retirement account. Typically, those who are advised to invest in annuities are those who are nearing retirement age; returns may be higher for younger people who choose to invest in other options, such as mutual funds. 

Do I Have to Pay Fees When I Purchase an Annuity?

Yes, there are fees associated with purchasing an annuity. The fees will differ based on the type of annuity but might include administrative fees, investment management fees, “surrender charges,” which are charged if you prematurely withdraw the annuity, and mortality and expense fees.

How Can I Learn More About Whether an Annuity Is Right for Me?

As you think about your best options for supporting yourself financially after you are no longer working and earning an income, you should consider the benefits and drawbacks of an annuity. At Top Investment Solutions, we can answer all of your annuity FAQs and guide you through the various types of annuities and related fees. To learn more, reach out to us by phone or online today. We serve clients nationwide. 

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