Annuities guarantee principal and offer upside market potential
Annuities are a growing option for those seeking more guaranteed sources of income in retirement and for those seeking more security from volatile markets. Annuities can provide solutions for both, but myths surround the reality of annuities and here are just a few of those:
Myth — Annuities have high service fees
Truth — Depending on the type of annuity you purchase (immediate, fixed or fixed indexed), your policy will most likely have no charges. But some annuities do have surrender charges on withdrawals taken during your surrender charge period; however, most still offer options to take a portion (usually 10%) surrender-penalty free. Only variable annuities have annual servicing fees similar to other managed accounts such as IRAs and 401(k) plans.
Myth — Annuities are complicated
Truth — They are quite simple. Annuities with a guaranteed lifetime income benefit work similar to Social Security or a pension. It can guarantee you a lifetime stream of income, subject to certain conditions and assuming no excess withdrawals are taken. Other annuities are structured for accumulation for wealth accumulation without risking money to the market.
Myth — Annuities are tied to the stock market, so I could lose my money
Truth — With a fixed indexed annuity, principal is guaranteed and your money is not invested in the market, but it provides the potential to earn interest linked to an index and returns can be quite impressive. So your account value will never be credited less than zero if the index decreases. Plus your account value will grow when the index increases.
Myth — I don’t have access to my money with an annuity
Truth — Many annuities allow for penalty-free withdrawals and amounts in excess of the penalty-free amount may be subject to surrender charges. Many annuities include riders, at no additional charge, that give you penalty-free access to 100% of your money if you meet certain conditions in regards to terminal illness or nursing home or home health care. These liquidity features may vary by state.
Myth — When I die, the insurance company the remaining balance
Truth — Fixed and fixed indexed annuities that haven’t been annuitized have surrender charges waived if the annuitant dies. Any remaining account value is passed to the named beneficiaries as a death benefit and it is void of probate.
Myth — I have to pay the insurance agent out of my pocket to purchase an annuity
Truth — You are not required to pay the insurance agent directly in order to buy an annuity. Your full premium is available to potentially earn interest from the annuity’s effective date. Annuities are only offered through our licensed insurance producers, who are compensated through commissions which are not deducted from the premium paid for the policy.
Reach out to Ascend to learn more about retirement planning and how an annuity may be a good option.