by Angie Sugimura
For investors looking to supplement their IRA or 401(k) plans, an annuity is an excellent way to continue to prepare for retirement. An annuity is a contract between the account owner and an insurance company. In return for the owner’s payment, the insurance company agrees to provide either a regular stream of income or a lump-sum payout at some time in the future. In addition to income, annuities often guarantee a death benefit, based on the claims-paying ability of the issuing insurance company, which is a minimum amount that will be paid to the beneficiaries of the policy.
Annuities can be immediate or deferred. With an immediate annuity, the investor begins to receive payments immediately upon investing, while a deferred annuity offers payments at a later date, such as retirement. Annuities may also be fixed or variable. Fixed annuities are primarily invested in government securities and high-grade corporate bonds, and offer a guaranteed rate, typically over a period of one to ten years. Variable annuities offer potential growth of capital, which compounds tax-deferred until the time of distribution. They enable the owner to invest in a selection of funds called sub-accounts, which are tied to market performance and often have a corresponding managed investment after which they are modeled.
You may have also seen people in the media talking about annuities offering guaranteed income for life. This feature is offered in many forms, from immediate/fixed income to lifetime income that allows you to invest your money for potential growth with premiere money managers. In order to determine whether this or any other annuity option is right for you and your specific income and investment needs, contact your financial professional today.
Angela Sugimura is a Senior Vice President/Investments and Branch Manager with Stifel, Nicolaus & Company, Incorporated, member SIPC and New York Stock Exchange, and can be reached by calling the firm’s Murrieta office at (951) 461-7220 or toll-free at (866) 894-2461.
Investors should obtain a prospectus for an annuity’s contract and the underlying subaccounts and consider the investment objective, risks, charges and expenses carefully before investing. The prospectus, which contains this and other important information, is available from your Financial Advisor and should be read carefully before investing. Variable annuities are not insured by the FDIC or any government agency and involve market risk, including the possible loss of principal. Variable annuities are suitable for long-term investment and entail fees, such as mortality and expense charges and optional benefit rider charges. Certain optional riders that provide guaranteed income carry limitations, such as minimum holding periods or age restrictions. Withdrawals are subject to income tax, and withdrawals prior to age 59 ½ may be subject to a 10% tax penalty. Guarantees are based on the claims-paying ability of the issuing insurance company.