TYPES OF ANNUITIES

There are two general categories of annuities:

  • Deferred Annuities: These are used to accumulate funds in tax advantaged ways. The different types of deferred annuities include:

    • Multi-Year Guaranteed Annuities (MYG): Very much like bank CDs, these annuities offer a guaranteed rate of return for a specified period of time (like 3% guarantee for 5 years, etc.) These are typically available in 3-10 year durations.

    • Fixed Indexed Annuities: These annuities offer a way to participate in stock index gains, while at the same time protecting your principal in the event the index goes down. These are interesting for those wanting a higher return than a MYG annuity, but not willing to risk their principal. The worst case is that the contract earns 0% over the year, but will lock in the gains from year to year when it goes up. These most commonly offer an income rider, which for an annual fee will guarantee lifetime income to start whenever elected.

    • Variable Annuities: These look very much like a brokerage account inside an annuity structure. The account value will fluctuate with the ups & downs of the investment options selected. They carry a variety of fees, and also include options for lifetime income riders. NOTE: Bayside Life does not offer variable annuities, and remains committed to the safety of your money through contractual guarantees found in the other fixed and indexed options.

  • Income Annuities: One of the biggest fears in retirement is running out of money. Annuities are the ONLY financial vehicle other than pensions and Social Security that can guarantee income for life. This peace of mind leads to a more secure retirement, knowing that your basics are covered for life. Types of income annuities include:

    • Immediate Annuities: A lump sum is exchanged for a guaranteed payment stream. This could be for lifetime, or a certain period of time, or a combination of the two. Payment begins within 1 year of premium payment. It is important to choose a strong insurer and to find the highest income possible. We do the shopping for you and can quickly present all your options.

    • Delayed Income Annuities: These are just like immediate annuities, where you exchange a lump sum for a guaranteed payment stream. However, these annuities allow you to choose a date in the future to start your income.

    • Income Riders: These are commonly found with fixed indexed annuities, where you retain the control of your annuity cash value as it earns interest. The rider provides guaranteed lifetime income withdrawals from your annuity, which grows the longer the annuity is held. The advantage here is that you can still surrender your annuity for cash if needed, knowing that otherwise you have an attractive lifetime income as well.

This is an interesting calculator to show the importance of securing lifetime income for your retirement: