Confused by annuities? You’re not alone.
At Scottsdale Wealth Advisory, we hear it all the time: What exactly is an annuity? How do they work? And which one, if any, is right for me?
When you try to research annuities online, you’re often flooded with ads, sales pitches, and conflicting advice. It’s hard to know what’s fact and what’s fiction.
That’s why we created a short, easy-to-understand video that gives you the straightforward basics of annuities. This is not a sales pitch. It’s a simple, fact-based starting point for anyone exploring how annuities might fit into their financial plan.
In this quick video, we cover:
- What an annuity is and how it works
- The 3 main types of annuities: fixed, variable, and indexed
- The different roles annuities can play in retirement planning
While this short video won’t tell you everything you need to know, it gives you the key fundamentals to start asking smarter questions and avoiding common mistakes.
If the video sparks more questions (and it likely will!), we offer a complimentary annuity coaching session where you can get personalized, unbiased guidance, without the pressure. Then, if you’re ready, let’s talk about your specific goals and how annuities might (or might not) fit into your retirement income strategy.
Transcript
Hi, I’m Brent with Scottsdale Wealth Advisory. If you’ve heard the word annuity and thought, “What exactly is an annuity?” You’re not alone. Oftentimes, annuity research can be daunting because when you Google the word annuity, you are bombarded with ads soliciting one type of annuity over another. You can’t decipher what is fact from fiction. It is hard to know who or what information to trust.
What Is an Annuity?
An annuity is a contract between you and the insurance company. You invest a lump sum up front or make scheduled deposits over time, and in return, the issuing insurance company will provide regular, guaranteed monthly or annual income payments either immediately or at some point in the future. The choice of when is for you to decide.
The 3 Main Types of Annuities
There are three main types of annuities.
Fixed Annuities (MIGAs) Explained
Fixed annuities, also sometimes referred to as a MIGA, is an acronym for multi-year guaranteed annuity. This type offers guaranteed interest or a scheduled maturity similar to that of a bank CD. You can choose to either let that money grow tax-deferred or you can take the interest as it’s earned as a form of guaranteed monthly or annual income.
Variable Annuities and Market Risk
Variable annuities are the only type of annuity that is considered an investment and directly tied to stock market performance. These types of annuities put your principal at risk.
Indexed Annuities: Principal Protection with Market-Like Gains
Indexed annuities provide protection of principal while still providing your money the opportunity to earn stock market-like gains. This annuity is designed for three types of investors.
The first is for those who want a safe accumulation as a stock market alternative. The second is for those who want a guaranteed lifetime income without giving up ownership of their principal, and what I refer to as a private high personal pension plan. The third is for those who just simply desire to leave a legacy.
Annuities for Income, Safety, and Legacy
Annuities can help protect principal, create reliable retirement income, or leave a lasting legacy, but not every annuity is the same. It’s important to know which one fits your financial goals.
Next Steps: Get Help Understanding Annuities
If you’re exploring annuities or want to review one you already own, I’d be happy to help you better understand what they are and how they work. Visit Scottsdale WealthAdvisory.com or just click the link in my bio below to set up a free annuity coaching session. Thank you.
