Let’s Talk About The “A” Word: Annuities

Today’s Prep:

We’ve all heard about annuities, but there’s still tons of confusion about them. What are the different types of annuities? And are any of them worth having?

 

Equipping Points:

Annuities are financial tools, but often people are so put off by them that they don’t even want to hear about them. We want to start by gaining a knowledge and understanding, so we will look at the four different types of annuities in this episode of the Retirement Ready podcast. Then, you can determine whether or not they are right for you depending on your situation.

All four types of annuities provide different options that may or may not fit into your financial plans. When people think of annuities, a lot of people first think of immediate annuities which provide payment for life. The downside is, if you die before you reach the value of what you paid for the annuity, you’ve lost money. In most cases, Eric hasn’t recommended these for his clients.

A fixed annuity allows you some access to the funds and pays a certain percentage for a number of years. At the end of the term, a window opens up to take out the money completely. What you’re looking for is a decent interest rate for a certain amount of time.

A variable annuity is not safe because your money is at risk. Variable annuities have a lot of fees in them and a lot of people don’t understand the fees in the fine print. You have to question, why are you in it? Will you use the benefits and features within the annuity or are you paying for things you don’t need?

The last category of annuities is the fixed index annuity, which is a subset of the fixed annuity. For someone who is looking for protection but still wants growth to combat inflation, this may be an option.

Do any of these types of annuities fit in your financial plans? Listen to the full episode to hear more information about annuities or click on the timestamps below to learn more about a specific type.

1:20 – There are four types of annuities.

2:58 – Immediate annuities are like a pension–payment for the rest of your life.

4:04 – The downside of immediate annuities.

5:05 – A fixed annuity is like a CD.

6:10 – The variable annuity has the worst connotation of the four types of annuities.

9:51 – Finally, the fixed index annuity interest rate is dependent on the movement of an external market index.

 

Related Resources:

Can Financial Planning Be A DIY Job?

How To Ask Better Financial Questions

 

Today’s Takeaway:

[spp-tweet tweet=”Annuities are tools. They’re not for everybody, but they can be very powerful if you understand what they can do.   –Eric Peterson“]

More From Eric:

The host: Eric Peterson - Contact - Call: (515) 226-1500

Subscribe To The Podcast:

Apple Podcasts  -  Google Podcasts  -  Spotify  -  Stitcher  -  iHeartRadio  -  TuneIn

Check out some other recent episodes

Financial Wisdom from Mark Twain

June 13, 2024

In the latest episode of the Retirement Ready Podcast, Eric invites us to explore the timeless wisdom of Mark Twain and how it applies to modern financial planning. Mark Twain, known for his wit and keen observations, offers quotes that are surprisingly relevant to today’s financial landscape. Eric takes these quotes and translates them into practical advice for those planning their retirement.

Read More

Understanding Bonds in Today’s Market

June 6, 2024

Are bonds really the safe investment we’ve always been told they are? What percentage of assets should a retiree or pre-retiree hold in bonds? In today’s episode, Eric addresses some of his most frequently asked questions about the world of bonds…

Read More

Understanding Your Financial Statements

May 30, 2024

Financial statements can often feel like a foreign language, filled with jargon and numbers that seem to have little relevance to your everyday life. However, understanding these documents is crucial for effective retirement planning. In the latest episode of the Retirement Ready Podcast, Eric breaks down the essentials of reading and interpreting your financial statements.

Read More

From Graduation to Retirement

May 23, 2024

This one goes to the grads! Whether you know someone graduating high school, college, or even preschool, graduation marks a new stage and season in life. Similarly, retirement is a new chapter in life. It’s a time of change, celebration, and sometimes, uncertainty. On today’s show, we talk through the similarities between leaving school and entering retirement.

Read More

401(k) Mistakes

May 16, 2024

Your 401(k) likely plays a major role in your retirement savings. That’s why it’s important that it’s set up and functions in the way that’s most beneficial to you. Following our last podcast about beneficiary mistakes, now we focus on common mistakes people make with their 401(k).

Read More

Beneficiary Mistakes

May 9, 2024

In this episode of the Retirement Ready Podcast, Eric guides us through the critical yet often overlooked details of beneficiary designations. Learn the simple yet vital steps to prevent beneficiary blunders that could lead to unnecessary headaches for your heirs. Eric calls these errors “low hanging fruit” because they’re easy to fix yet can save your family from future heartache.

Read More

How Emotions Can Impact Your Retirement Plan

May 2, 2024

Dive into the world of financial emotions in this episode with Eric Peterson. Discover how greed, fear, hope, and pride can make or break your investment strategy. Eric unravels the complexities of managing emotions to ensure a secure and enjoyable retirement.

Read More

Retirement Planning Statistics

April 25, 2024

Retirement is closer than you think, but are you ready? With a staggering number of people lacking confidence in their retirement savings, Eric shares the misconceptions people have and what mistakes can derail someone’s financial future. Many people feel inadequate when it comes to what they have saved in their nest egg, uninformed about the pitfalls of target date funds, and unprepared about the reality of leaving the workforce earlier than expected.

Read More

Mailbag: Should I Fire My Broker?

April 18, 2024

Navigating life’s financial crossroads can be tricky, especially when it involves your financial future. In this episode of Retirement Ready, Eric addresses these complex issues head-on. How do you best evaluate your broker and your investment performance against the S&P 500? Eric says a lot of that comes down to setting expectations and understanding the risks. Then, Holly wants to know what to consider before making a midlife career change.

Read More

Putting It Off

April 11, 2024

We are all guilty of procrastinating from time to time. Financially speaking, though, this can get you into a lot of trouble. Let’s talk about the areas where it might feel better to kick the can down the road.

Read More

Leave a Comment