Medicare Supplement Store Blog
Annuities are insurance products offered by insurance companies. They can be purchased at any age but are most often purchased during retirement to provide additional income in the future if needed.
Annuities are particularly popular among retirees who have already purchased traditional retirement accounts like an IRA or 401(k).
What is an Annuity?
An annuity is a contract between an insurance company and an individual in which regular payments are guaranteed for a predetermined period.
Depending on how you use your annuity, there are several different types available.
Common options include income payments for life or a set number of years; some may even allow you to borrow against your accumulated savings. You can also opt for lump-sum payouts at any time during the contractual term.
Defined Benefit vs. Defined Contribution
Defined benefit plans are generally referred to as traditional pension plans. They offer benefits that are defined by a formula or plan document.
An example of a traditional pension plan would be one in which your employer offers you an annual retirement benefit equal to 3% times your final average pay (i.e., 3% multiplied by your last few years' salaries) times years of service with that employer.
On the other hand, your employer has no formal guarantee regarding how much money will be available for retirement in a defined contribution plan.
In some cases, it may even be possible for employers to make contributions to their employees' accounts on a discretionary basis—meaning they could choose not to make any contributions at all.
Contributions made under these types of plans can usually come from both employers and employees.
However, some employers require workers to contribute a set percentage of their income before contributing anything themselves.
What are Investment Options?
An annuity is a financial product that can help you manage your money in retirement.
Unlike mutual funds, which buy and sell stocks and bonds, an annuity gives you access to different investment options (also called sub accounts or lifestyle features) — typically bonds, stocks, and mutual funds — within a single contract.
Each option has its unique risks and potential returns, but traditional fixed-rate payments are likely your best bet if you are looking for a steady income for life.
However, if you want more control over how much income to withdraw each year, variable payouts might be better suited for you.
At the Medicare Supplement Store, we put our clients first by offering them policies that they can afford. Having insurance is a necessity nowadays, and we're here to help you out. Learn more about our products and services by calling our agency at (732) 252-8828. You can also request a free quote by CLICKING HERE.