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The trouble with retirement is that you never get a day off.  

- Abe Lemons

 

When a man retires and time is no longer a matter of urgent importance, his colleagues generally present him with a watch. 

- R.C. Sherriff 

Half our life is spent trying to find something to do with the time we have rushed through life trying to save. 

- Will Rogers


There's never enough time to do all the nothing you want. 

- Bill Watterson

 

  
Q&A

Actually, there are two types of deferred fixed annuities. Annuities purchased with a onetime premium are called single-premium deferred annuities. Annuities funded periodically over a period of time are called flexible-premium deferred annuities.         More...


Articles

Although once the province of insurance companies, annuities are now offered by some brokerage houses as well. If used properly, an annuity provides tax deferral of interest and capital gains, and can contain the option of a guaranteed monthly income that you cannot outlive.         More...


Resources
U.S. Securities and Exchange Commission
National Association of Securities Dealers, Inc.
National Association of Insurance Commissioners
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Annuities


Annuities (Life, Insurance)

The average American spends 18 years in retirement — and less than half of them have set aside money for this period (Federal Consumer Information Center).

To help protect yourself from becoming one of them, you can invest in an annuity: a financial contract with an insurance company that generates an income stream provides for your golden years. Annuities offer a great way to save now — and beat the retirement clock.

If you’re confused about annuities, don’t feel like the Lone Ranger. The main reason for the confusion: Annuities may be single or flexible-payment; fixed annuity or variable annuity; deferred annuity or immediate annuity.

Here’s an overview:

Single vs. Flexible-Payment Annuities

You can purchase an annuity either by making a one lump-sum payment (single-premium annuity) or through ongoing contributions (flexible-payment annuity).

Fixed Annuities vs. Variable Annuities

Fixed annuities earn guaranteed interest for a specific period, such as one to five years. Once this period is over, a new rate is set for the next period. Although this guarantee of interest and principal makes fixed annuities similar to Certificates of Deposit (CDs), unlike most CDs, the FDIC does not insure annuities.

Variable annuities usually offer a range of investment or funding options (such as stocks, bonds, and money market instruments). The principal is not guaranteed and your return might vary. Some variable annuities allow you to divide your investment between these higher-risk vehicles and, a fixed account that guarantees principal and interest.

With fixed annuities, the insurance company factors in most contract expenses — such as maintenance and contract fees — when setting interest rates or payment amounts. Variable annuities are usually more complex than fixed annuities with more features and higher fees. Both types of annuities might set “early surrender” fees for opting out of an annuity.

Deferred vs. Immediate Annuities

You’ll receive payments earlier from an immediate annuity and delay getting money from a deferred annuity. The type of payout depends on your needs.

With a Deferred Annuity:

  • You don’t pay income tax on earnings until you withdraw money, usually during retirement, when you’ll probably be in a lower tax bracket.
  • You can put in as much money as you want.
  • You can provide death benefits to your beneficiaries without the costs and delays of probate.

With an Immediate Annuity:

  • You get guaranteed payments for life to supplement other income sources (Social Security, pensions, etc.) and can choose how often to receive payments.
  • You pay income taxes only as you receive payments.
  • You can minimize the worry of making sure that your financial resources will last for your lifetime.

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