Annuities

Unlike other types of financial vehicles, annuities are the only instrument capable of paying a guaranteed lifetime income. No individual investor can duplicate what insurance companies can offer you when it comes to paying a guaranteed income stream. Nor can any other asset class do what annuities do. They have contractual guarantees backing them.

So what exactly is an annuity? 

An annuity is a contract between a policyholder and an insurance company. The policyholder pays premium payments in exchange for certain contractual guarantees. These guarantees include a variety of contract components such as income, interest rates, or withdrawals. The premium payments can be a one-time lump sum or a number of payments over time. Annuities allow you to have a steady retirement income stream and most annuities even allow for tax-deferred money growth until they are withdrawn.

How do the income payments work?

Depending on the annuity type, you’ll start receiving payments immediately or at some point in the future. These payments can be paid out monthly, quarterly, annually or in a lump sum. You can choose whether you receive payments for the rest of your life or for a fixed number of years. The amount you receive each payment depends on whether you selected a fixed annuity (a guaranteed payout) or a variable annuity (payout amount is determined by the investment performance). 

What are the benefits of annuities?

• More conservative investment compared to assets like stock
• Can last your lifetime or a specific guaranteed period
• Backed by insurers with financial strength and claims-paying ability
• Guaranteed minimum interest rates
• Guaranteed income benefits 
• Tax-deferred growth
• No annual contribution limit
• Guaranteed death benefit (subject to certain conditions)
• Ability to add income riders 

These are just a few of the annuity benefits. Depending on the type of annuity product you buy, there may even be more advantages than what is listed here. 

You want to make sure you carefully examine all your annuity options with an annuity professional before making a purchase. At Metro, we have several annuity experts who can help you find which annuity option will work best for you and your financial goals.