Fixed annuities can play an important role in your retirement planning. While a pension and Social Security may provide some retirement income, it may not be sufficient for the kind of retirement you want to have. Fixed annuities can help you save for retirement and provide you with additional income over the years ahead.
What Is a Fixed Annuity?
Essentially, a fixed annuity is a CD-type investment issued by an insurance company. You pay into the annuity, either in one lump sum or in payments over time. In exchange, you get a guarantee of receiving payments in the future, either for a specified period or for the duration of your life.
How Can Fixed Annuities Help with Retirement Planning?
Annuities are designed to help you save for your retirement and provide you with income when you retire. They offer several benefits, including:
Tax-deferred growth potential
Protection from market downturns, which is helpful in keeping up with rising medical costs and inflation
Flexible income options
Joint-life payout for both you and your spouse during retirement
Death benefit for your beneficiaries (or a cause or charity you believe in)
An annuity is different from most other retirement savings vehicles. It’s actually a contract between you and an insurance company. In return for making one or more premium payments, the insurance company agrees to provide you an income stream, usually during retirement. You can elect to receive payment all at once or as a series of payments, even for the rest of your life. Withdrawals are subject to income tax, and withdrawals before age 59½ may be subject to a 10% tax penalty.
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