Understanding the Basics


Annuity Basics

An annuity is an agreement that an individual sets up with an insurance company

Basically, the individual contributes a set amount of money, and then begins receiving payments after a set period of time. Typically, an annuity can offer you the ability to receive payments for the rest of your life. Additionally, you can decide whether you want to receive these payments monthly, quarterly, or annually.

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Fixed Indexed Annuity Basics

An FIA (fixed indexed annuity) is an annuity with the benefit of keeping your money safe, while gaining indexed interest at a reasonable rate.** This is because, although your interest rate can rise based on the performance of a market index, your money is not actually invested in the stock market. So, your FIA’s value will not fall even in the event of a market downturn. No matter what happens in the market, the money in your annuity will remain guaranteed* safe.

Annuities and Taxes

An annuity grows tax-deferred. This means that you only pay taxes on the money in your annuity when it’s taken out. Additional tax benefits may apply, depending on your specific situation. For example, if you have received a lump-sum payment from an employer-issued 401(k), you may be able to transfer that money into an annuity, depending on certain factors. This could allow you to postpone taxes on it. However, when it comes to topics like this, it’s always recommended that you consult a qualified tax advisor.

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