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Is an Annuity appropriate for you and your family? Do you need your existing annuity reviewed? 

What is an Annuity?

An annuity is a financial product or contract offered by insurance companies, banks, or other financial institutions. Typically, it is designed to provide a regular stream of income over a specified period or for the lifetime of the annuity holder. They can also be used to protect assets, accumulate wealth or provide a death or long term care benefit to the investor. 

When you purchase an annuity, you typically make a lump sum payment or a series of payments to the annuity provider. In return, the provider promises to make regular payments to you, either immediately or at a future date. The payments can be structured in different ways, depending on the type of annuity you choose.

There are several types of annuities, including fixed annuities, variable annuities, indexed annuities, and immediate annuities. Here's a brief overview of each:

  1. Fixed Annuities: With a fixed annuity, your payments are based on a predetermined interest rate set by the annuity provider. The payments remain fixed throughout the term of the annuity.
  2. Variable Annuities: Variable annuities allow you to allocate your payments among different investment options such as stocks, bonds, or mutual funds. The income you receive from variable annuities is not fixed and depends on the performance of the underlying investments.
  3. Indexed Annuities: Indexed annuities provide returns based on the performance of a specific market index, such as the S&P 500. They offer the potential for higher returns compared to fixed annuities but typically have a cap on the maximum return you can earn.
  4. Immediate Annuities: Immediate annuities begin making regular payments to you shortly after you purchase the annuity. These annuities are often used to convert a lump sum of money, such as retirement savings, into a guaranteed income stream.

Annuities can be beneficial for individuals seeking a steady income during retirement or as part of a long-term financial plan. However, it's essential to carefully consider the terms, fees, and surrender charges associated with annuities before making a decision. Consulting with a financial advisor can help you determine if an annuity aligns with your financial goals and circumstances.

Should I have my Annuity reviewed?

Do you have an annuity that's been sitting around for years, maybe decades? Have you ever reviewed your investment after the initial purchase? Rates, terms and times have changed. Here's why annuity reviews are important:

  • Performance: Annuities are long-term financial products designed to provide a steady income stream in retirement. Regular reviews allow individuals to assess the performance of their annuities, compare them to their initial expectations, and determine whether the annuity is meeting their financial goals. By reviewing the performance, individuals can make informed decisions about their investments and consider adjustments if needed.
  • Financial Stability: Annuities are typically purchased with the goal of ensuring financial stability in retirement. However, economic conditions and personal circumstances can change over time. By conducting regular reviews, individuals can evaluate whether their annuity remains a suitable option given their current financial situation, lifestyle, and retirement plans. If adjustments are required, such as modifying the annuity structure or exploring additional investment options, reviews help identify those needs.
  • Contract Terms: Annuities often come with complex contracts that contain various terms, conditions, fees, and benefits. Conducting regular reviews allows individuals to revisit and understand the specifics of their annuity contracts. This understanding helps individuals make informed decisions about the benefits they are entitled to, the fees they are paying, and any potential limitations or restrictions associated with their annuity.
  • Beneficiary Considerations: Annuities often have beneficiary provisions, allowing individuals to designate someone to receive the remaining annuity payments upon their death. Regular reviews provide an opportunity to revisit and update beneficiary designations, ensuring they align with current wishes and circumstances.
  • Market and Economic Changes: Financial markets and economic conditions can fluctuate over time. Regular reviews of annuities help individuals stay informed about market trends and potential changes that could impact their annuity performance. This knowledge empowers individuals to make informed decisions about their annuity investments and consider adjustments or alternative strategies if necessary.

Overall, annuity reviews are essential to evaluate performance, ensure personal financial stability, review contract terms, revisit beneficiary designations, and stay informed about market changes. By conducting regular reviews with an experienced financial professional, individuals can make informed decisions about their annuities and ensure they align with their evolving financial needs.

The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.

Fixed and Variable annuities are suitable for long-term investing, such as retirement investing.  Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply.  Variable annuities are subject to market risk and may lose value.

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