An annuity could be a beneficial addition to your financial plan. Depending on the annuity you have, you may be able to rely on a steady stream of income throughout the remainder of your lifetime. You could also attain tax-advantaged growth.
There are two main categories of annuities. These are fixed and variable. While each of these annuity types may have some similarities, there are also some significant differences. So, it is important that you have a good understanding of each before you commit to one or the other.
Fixed versus Variable Annuities
Fixed annuities provide many guarantees. For instance, the interest rate may be set for a certain period of time. There could also be a minimum “floor” below which the interest rate on a fixed annuity will never fall.
There are no losses incurred with a fixed annuity. So, while the positive return will typically be somewhat low, your principal is protected in any type of stock market or economic environment. Fixed annuities are oftentimes enticing for retirees and those who are approaching retirement.
Alternatively, the return on a variable annuity is based in large part on the performance of underlying investments, such as mutual funds. When these investments perform well, you could generate a significant amount of tax-deferred growth. But the opposite is also true in that if the investments perform poorly, the value of the annuity will go down.
Which Type of Annuity is Right for You?
Before you purchase any annuity, be sure that you talk with a retirement planning specialist who can answer any questions that you have.
For over 30-years Flavio “Joe” Carreno of The Retirement Advantage has been a Federal Employee Retirement System specialist (FERS) as well as a Florida Retirement System specialist (FRS) independent advocate. An affiliate of PSRE (Public Sector Retirement Educators), a Federal Contractor & Registered Vendor to the Federal Government, also an affiliate of TSP Withdrawal Consultants.
We will help you understand your FERS & FRS Benefits, TSP & Florida D.R.O.P. withdrawal options in detail while recognizing & maximizing all concurrent alternatives available.
Our primary goal is to guide you into retirement with no regrets; safe, predictable, stable, for life. We look forward to visiting with you.
Not affiliated with the U.S. Federal Government, the State of Florida, or any government agency. The firm is not engaged in the practice of law or accounting. Always consult an attorney or tax professional regarding your specific legal or tax situation. Although we make great efforts to ensure the accuracy of the information contained herein we cannot guarantee all information is correct. Any comments regarding guarantees, safe and secure investments & guaranteed income streams or similar refer only to fixed insurance and annuity products. Fixed insurance and annuity product guarantees are subject to the claims‐paying ability of the issuing company. Annuities are long-term products of the insurance industry designed for retirement income. They contain some limitations, including possible withdrawal charges and a market value adjustment that could affect contract values. Annuities are not FDIC insured.