Sun Cities Financial Group: Your Annuity Expert
Annuities can be a great way to maintain a stable income after retirement. However, getting an annuity can quickly become confusing, and it might even seem like more trouble than it’s worth. If you need some help exploring your annuity options, look to the team at Sun Cities Financial Group. We’re experts in financial services, and our team is here to help you plan for the future. Browse our frequently asked questions to learn more about what an annuity could mean for you.
What Is an Annuity?
An annuity is a contract between you and an insurance company. This contract states that you’re responsible for making agreed-upon payments in exchange for specific benefits.
How Do Annuities Work?
The annuity transaction begins when an individual pays an insurance company a set amount. The insurer then invests these payments, and at the end of the annuity term, the insurer pays the individual back the initial investment plus its earnings. Depending on the provisions of the contract, the individual might receive a lump-sum payment or an annuity (a set of payments given out within a set period of time).
What About Variable Annuities?
Variable annuities depend on the performance of the investments. Insurance companies must guarantee a minimum payment, but the total amount may differ from time to time. Unlike fixed annuities, variable annuities are regulated by the SEC and require several additional fees and charges.
Are Annuities a Good Investment?
Annuities can be an excellent investment, depending on your unique circumstances. Most people who choose annuities as an investment are interested in saving money for a particular goal or need a stable source of income after retirement. However, it’s important to remember that annuity funds are not accessible during the designated growth period. If you choose to take out your money before the period is up, you’ll be on the hook for additional taxes and penalties.
What Types of Annuities Are Available?
Annuities aren’t one size fits all. In fact, there are several different annuity models to choose from. With the help of Sun Cities Financial Group, you can select the option best suited to your needs. Here’s a brief overview of available annuities:
- Single-Premium: The investment is made in full at one time.
- Flexible-Premium: The investment is made through a series of payments.
- Immediate: You don’t have to wait for payments—they begin right after the annuity is fully funded.
- Deferred: Annuity payments start several years after the contract is drawn up.
- Fixed: Investments are low-risk, and payments are guaranteed for the duration of the agreed-upon period.
- Variable: Investments are higher risk, but you have the potential to disperse your money across various managed funds.
What Are My Options for Collecting an Annuity?
As the time to collect your annuity approaches, it’s a good idea to think about your collection options. Sun Cities Financial Group can help you choose from the following:
- Fixed Amount: You receive a fixed amount each month.
- Fixed Period: You receive a fixed amount over a chosen period of time.
- Lifetime: You continue to receive payments for as long as you live.
- Life with Period Certain: You receive payments for the rest of your life, but with a minimum period.
- Installment-Refund: You receive payments for the rest of your life, and the remaining annuity goes to a beneficiary after your death.
Are There Disadvantages?
Annuities have advantages and disadvantages, just like any other financial decision. The main drawback of investing in an annuity is that your funds will be inaccessible for the duration of the growth period. That means you won’t be able to take your money back, even in an emergency, without incurring fines and penalties. In general, you can expect a 10% premature withdrawal penalty if you go ahead with the withdrawal.
Are There Any Added When Buying an Annuity?
Annuities aren’t necessarily “free money.” Depending on the type of annuity you choose, you may be subject to certain fees. These include sales commission, surrender penalties, maintenance feeds, and investment advisory fees. The team at Sun Cities Financial Group can walk you through whether any of these fees may apply to you.