Five Common Annuity Misconceptions
More misconceptions and myths swirl around annuities than any other financial product. Some of the confusion may be due to the fact that annuities have greatly improved over the past 10 years, offering more options and benefits than ever before.
One of the most flexible types of annuities is a fixed indexed annuity (FIA). An FIA is a financial product sold by insurance companies. The insurance company guarantees to protect your principal and give you the potential for growth linked to an index, such as the S&P 500. With an FIA, you can choose to receive guaranteed lifetime income!
It’s important to understand the facts as it relates to five common annuity misconceptions:
Misconception #1: Retirement accounts don’t need an annuity
The Facts: Two of the essential benefits and features of FIAs is the guarantee that you will never lose your principal, and when you begin to take income, you will never run out of money. 401(k)s and IRAs do NOT provide any asset protection from stock market losses, nor will they provide guaranteed lifetime income streams.
Misconception #2: Annuities charge high annual fees
The Facts: With an FIA, the only time you may be charged a fee is when you choose to add an optional policy rider. For instance, if you choose an income rider, which guarantees to pay lifetime income, some annuities (though not all) may charge a low fee in exchange for this benefit.
Misconception #3: Annuities are too complex for the average person
The Facts: An annuity is simply a contract with an insurance company to get financial benefits in the future. When you purchase a fixed indexed annuity, you set aside a portion of your savings in return for a guarantee of your principal, with an option for a future stream of guaranteed lifetime income.
Misconception #4: You lose your annuity account balance when you pass away
The Facts: Fixed indexed annuities allow you to pass your account balance to your named beneficiaries after you pass away. You may choose to set up your annuity as “joint life” in order to provide you and your spouse guaranteed lifetime income, no matter how long each of you may live.
Misconception #5: Annuities are only for older investors
The Facts: No matter your current age, an annuity can be a smart way to diversify your portfolio. A fixed indexed annuity provides balance and stability. The No. 1 fear among today’s seniors is “running out of money, before running out of time.” FIAs provide a dependable stream of guaranteed lifetime income to depend on as you age.
Today’s FIAs offer a range of features and benefits that protect your savings from any and all market loss, provide guaranteed lifetime income, and allow you to provide the remaining assets in your account to your designated beneficiaries.
P.S. – Please share this article with others by simply clicking on the blue social media icons at the top of your screen!
Annuity123 does not offer insurance, investment, or tax advice. You should always seek the guidance of qualified and licensed professionals concerning your personal insurance, investment, or tax matters. Annuity123 is simply a platform allowing retirement planning professionals to help educate the community on various retirement planning topics. Annuity123 does not directly support or take responsibility for ensuring the accuracy of the content displayed in the articles themselves or any feedback that may get added in the Comments section from the community.