Why are there so many different types of annuities?

This week we get a little nerdy. Who am I kidding. We get A LOT nerdy.  We chat about fixed annuities vs. variable annuities.
Fixed indexed annuities

• Offer a guaranteed minimum interest rate with the potential for additional growth based on the performance of a market index, such as the S&P 500.
• Are less risky than variable annuities, but they also have the potential for lower returns.
• Have surrender charges that may prevent you from accessing your money early.

Variable annuities

• Invest your money in subaccounts that track different types of investments, such as stocks, bonds, and mutual funds.
• Offer the potential for higher returns than fixed indexed annuities, but they also carry more risk.
• Do not have surrender charges, so you can access your money at any time.

Guaranteed lifetime income

Both fixed indexed annuities and variable annuities can be used to provide guaranteed lifetime income. However, the specific features of these income options vary from product to product.

• Fixed indexed annuities typically offer a lifetime income rider that guarantees a specified monthly income for life. The amount of the income is typically based on the amount of money you invest in the annuity and the interest rate that is credited to your account.
• Variable annuities also offer lifetime income riders, but the amount of the income is not guaranteed. Instead, it is based on the performance of the subaccounts that your money is invested in.

It is important to compare the features of different indexed annuities and variable annuities before you decide which type of annuity is right for you. Consider your financial goals, risk tolerance, and time horizon when making your decision.

Here are some additional things to consider when comparing indexed annuities and variable annuities:

• Fees: Annuities can have high fees, so it is important to compare the fees of different products before you buy.
• Surrender charges: Some annuities have surrender charges that can prevent you from accessing your money early. These charges typically decrease over time, so it is important to understand the surrender schedule before you buy.
• Death benefit: Some annuities offer a death benefit that will pay out a death benefit to your beneficiaries if you die before the annuity matures. Other annuities do not offer a death benefit.

Are you getting what you want or are you putting yourselves in a position someone could try and get the better of you?

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Telton W Hall, CFP® is a husband, father, retirement planning expert, small-town-boy at heart, nationally published author, sought-after speaker, former college basketball player, founder/owner/team member of Utah based Advanced Financial Planning LLC, hiking enthusiast, Jesus follower, business leader, team builder, and to the core Telton is an educator.