How Do I Shop For Annuities?

What is an Annuity? An annuity is an exceptional retirement-planning investment option for individuals, which allows money to grow tax-deferred. The earnings are exempt from federal income tax until the funds are withdrawn or dispersed. An annuity also provides a choice of how to receive the income when you surrender the policy. You can take the money in a lump-sum payment, or you can choose to receive the funds via monthly checks.

Once you start to withdraw funds, your withdrawal and distributions are taxed as income. However, if you start receiving income from the annuity upon retirement, you likely will be in a lower tax bracket than during your years of employment. An annuity is an excellent way to supplement Social Security or pension income.

Are There Many Types of Annuities? There are two basic types of annuities: fixed and variable. The fixed annuity, which pays a fixed rate of interest, provides a series of periodic payments for a specified amount of time. These payments can begin immediately, once you've purchased the annuity, or you can choose to defer the payment, so that it begins at some future date.

The longer you wait to receive your annuity, the more time it has to grow tax-deferred. You can purchase a fixed annuity with a single premium payment or with multiple payments paid over time. The fixed annuity is a safe form of investment, because the interest rate is guaranteed never to go below a specified level.

The variable annuity works in a way similar to the fixed annuity, but has a changing interest rate. This rate can fluctuate, depending upon the performance of the stocks, bonds, and money-market accounts in which it is invested. The variable annuity has greater potential for growth than the fixed annuity, but also a greater potential for loss due to the varying interest rates.

Which Annuity is Right for Me? The answer depends on you. If you want a steady, guaranteed income, you probably should choose a fixed annuity. If you're more of a risk-taker and willing and able to ride out investment ups and downs, a variable annuity may be a better fit for your lifestyle. Here at First United American, we offer a Flexible Premium Fixed Annuity, which provides safety, security, and stability, all desirable elements for a happy, productive retirement.

If you haven’t considered an annuity before, why not consider it now? First United American’s annuity product offers secure investment options. Talk to a First UA Agent to find out more.