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The Importance of Annuities



Annuities are insurance products that provide a protection strategy, usually used for assets dedicated to retirement planning. They offer tax-deferred growth, and depending on the annuity, different protections may be provided. They also may provide for principal protection or the creation of a guaranteed income stream that cannot be outlived, even if the principal has dissipated. There are several types of annuities available, including fixed, variable, and indexed annuities, and each has its own unique benefits and risks.

When purchasing an annuity, it’s important to consider the fees and charges that may be associated with the product. Additionally, distributions from annuities may be taxed at different rates, so it is important to understand the tax implications prior to investing in these vehicles.

Call Chartered Financial Services at 800-549-6007 to learn more about annuities or contact us if you would like to have a discussion.

What are annuities?

An annuity is a contract between you and an insurance company. The insurance company promises to pay a specific amount of money either immediately or over a specified period of time, depending upon the type of annuity purchased. These products are meant for long term investment strategies, usually targeting retiremement objectives. 

How do annuities work?

Assets placed in an annuity grow in a tax-deferred manner. There are different types of annuities available. Your long-term objective dictates which one might be the most suitable for you. There are many different types of annuities, among them are: 

  • Variable annuity 

    Variable annuities allow for investing in a variety of underlying assets for the potential of market-based performance. These sometimes also have guarantees for income creation with the use of a living benefit. 
  • Fixed annuity

     Fixed annuities offer a guaranteed rate of return on the principal. In order for these to create guaranteed incomes, they need to be annuitized.   
  • Indexed annuity 

    Indexed annuities offer the capability to protect the principal from market loss while also offering crediting strategies for potential growth. Depending on the annuity, this growth may be applied to the principal and/or a guaranteed income stream.  


Should I invest in an annuity?

Once these aspects are understood as well as the capabilities of annuities, you will see why they may become an important addition to offer peace of mind during your retirement years. Annuities can be a good financial decision as part of an overall, well-advised strategy.It is recommended that you speak with an advisor to best guide you through the evaluation of which type of annuity may be best for you.