Annuities
Learn about this important option to achieve your retirement goals.
Understanding Annuities: A Steady Path to Retirement Income
Annuities can be a powerful tool for retirement planning, offering a set income and valuable tax advantages. But with so many options available, understanding how annuities work—and which type might be right for you—can feel overwhelming. We’re here to make it easier.
What is an Annuity?
At its core, an annuity is a contract between you and an insurance company. You contribute money—either as a lump sum or through a series of payments—and in return, the insurer agrees to make regular payments to you, either immediately or at a future date.
Annuities are designed to help manage the risk of outliving your savings. Many also offer a death benefit that ensures your beneficiary receives a minimum amount—such as your total premium contributions—should you pass away during the accumulation phase.
Key Benefits of Annuities
- Tax-Deferred Growth: Earnings grow without being taxed until you begin withdrawing income.
- No Contribution Limits: Unlike IRAs or 401(k)s, there are no annual contribution caps.
- Income Stream Options: Choose when and how you receive payments—either for a set period or for life.
- Optional Features: Some annuities offer riders for long-term care, inflation protection, or enhanced death benefits (additional cost may apply).
Types of Annuities
1
Fixed Annuities
A fixed annuity provides guaranteed growth during the accumulation phase and predictable income in retirement.
- Offers a minimum interest rate
- Payments can be set for a fixed period or for life
- Suitable for conservative savers seeking stability
Not registered with the SEC and not subject to market risk.
2
Variable Annuities
With a variable annuity, your payments and account value fluctuate based on the performance of investment subaccounts.
- Offers potential for higher returns
- Greater flexibility in investment choices
- Income depends on market performance
Variable annuities are securities and are regulated by the SEC. Fees and risks vary. Review the prospectus before investing.
3
Indexed Annuities
Also called equity-indexed annuities, these are a hybrid of fixed and variable products. Your returns are tied to a market index, such as the S&P 500.
- Potential for higher gains than fixed annuities
- Downside protection with a guaranteed* minimum
- Commonly includes caps, spreads, and participation rates that affect returns
Not all indexed annuities are considered securities; regulatory status depends on product structure.
Things to Consider Before Purchasing
Before choosing an annuity, it’s important to evaluate:
- Your time horizon: How long before you need the income?
- Your risk tolerance: Are you comfortable with market exposure?
- The insurer’s financial strength: Ratings from agencies like AM Best or Moody’s can give insight into stability.
- Fees and charges: Be aware of administrative fees, rider costs, and surrender charges.
- Tax implications: Work with a tax professional to understand how annuity income will be treated.
Ready to Learn More?
Annuities aren’t one-size-fits-all—and that’s a good thing. Whether you’re planning for future income, looking to protect your savings, or want to leave a legacy for loved ones, the right annuity can help support your goals.
Have questions? Want a personalized annuity comparison? Contact our team to schedule a no-obligation consultation.
Horner Investment Group is a DBA of Atlantis Wealth Advisors, LLC. Horner Insurance, LLC, and Horner Tax Services, LLC do not have any relationship with Atlantis Wealth Advisors, LLC.
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