Many people have found annuities helpful tools as they lay the groundwork for future income – particularly for retirement.
Annuities can be part of a balanced approach to setting aside money you’ll need later.
There are three basic kinds of annuities: fixed-rate annuities, variable annuities and fixed-indexed annuities. An annuity is a contract between you and an insurance company in which the company guarantees you a regular payment in some contracts.
Fixed-indexed annuities were created 25 years ago to offer something between fixed and variable annuities – principal protection, but with an opportunity to gain from market growth. Their return varies more than a fixed-rate annuity, but not as much as a variable annuity.
With FIAs, your return is based on the performance of a specified market index, such as the S&P 500 or a real estate or commodity index. You’re able to capture some of the growth in these indexes (when growth occurs).
FIAs are not the answer to all investment questions. It’s always a good idea to have some liquid funds in a bank/credit union account, preferably in one paying competitive rates. Everence® Federal Credit Union offers competitive rates on savings products.
And of course, if you have many years until retirement, you can afford to take some market risk to increase the opportunity for long-term growth. Everence consultants can help you find a balanced, diversified mutual fund.
But for that space in the middle, which might be invested in bank CDs or bonds, ask your investment professional about fixed-indexed annuities. Perhaps they could be one way to counteract the historically low interest rates we are experiencing?