Annuities
Secure Your Future, Today.
Annuities
Secure Your Future, Today.
Annuities Overview
Annuities are one of the few sources of retirement income that can guarantee income for life.* So, no matter how you envision retirement, having the freedom to live life your way will depend, at least in part, on having a secure source of reliable income. Keep in mind Annuities can be tailored to individual needs and preferences, providing flexibility in terms of payout options and duration.
What is an Annuity?
Types of Annuities
Compare Annuity Options
Are Annuities Right for You?
Annuity Features & Benefits
What is an Annuity?
An annuity is a financial product designed to provide a stream of income for a specified period or for the rest of an individual’s life. It is a contract with an insurance company designed to help you accumulate funds for a long-term goal (like retirement) and/or protect you from the risk of outliving your savings. When an individual purchases an annuity, they make either a lump-sum payment or a series of payments to the insurance company. In return, the insurance company promises to make regular payments to the annuitant, either immediately or at a specified future date.
Who Should Consider an Annuity?
1. If You’re Planning for Retirement
Annuities can be used as part of a retirement strategy to ensure a steady income stream during retirement.
2. If You’re Seeking Guaranteed Income
Individuals looking for a predictable and guaranteed source of income may find fixed annuities appealing, as they provide a steady payout.
3. If You Want to Mitigate Longevity Risk
4. If You Prefer Tax-Deferred Growth
Annuities offer tax-deferred growth, meaning that investment gains are not taxed until withdrawals are made, potentially allowing for more significant accumulation over time.**
Types of Annuities
Immediate Annuity
How it works: You pay a lump sum, and the insurer provides immediate, guaranteed income (for life or a set period).
Growth: None – Focus is on income, not accumulation.
Principal Protection: ✅ Yes (but you give up access to the lump sum).
Best for: Retirees who need instant, predictable income (like a pension).
Deferred Annuity
How it works: Allows the annuitant to accumulate money, which grows tax-deferred for years before converting to income payments.
Types: Can be fixed, indexed, or variable.
Best for: Those saving for retirement who want tax deferral and future income.
Fixed Annuity
How it works: Combines features of both fixed and variable annuities and pays a guaranteed fixed interest rate (e.g., 2–4%) set by the insurer.
Growth: Predictable but usually lower than other annuities.
Principal Protection: ✅ Yes (no market risk).
Best for: Conservative investors who prioritize safety over growth.
Variable Annuity
How it works: Lets you invest in sub-accounts (similar to mutual funds) tied to the market.
Growth: High potential but also high risk (returns depend on market performance).
Principal Protection: ❌ No – You can lose money.
Best for: Aggressive investors willing to take risk for higher growth, often with added riders (for extra cost).
Fixed Indexed Annuity
How it works: Earns interest based on a stock market index (e.g., S&P 500) but does not directly invest in it. Returns are calculated using a formula (participation rates, caps, or spreads).
Growth: Moderate – Potential for higher returns than fixed annuities, but gains are capped (e.g., 5–7% max per year).
Principal Protection: ✅ Yes – No loss if the index drops (may earn 0% in bad years).
Best for: Those who want market-linked growth without risk of loss, but are okay with limited upside.
Longevity Annuity
How it works: Starts payouts later in life (e.g., age 80+) to hedge against outliving savings.
Growth: Minimal (designed for late-life income).
Principal Protection: ✅ Yes.
Best for: Those worried about running out of money in extreme old age.
Annuity Product Comparison
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Deferred Fixed Annuity
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Variable Annuity
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Fixed Index Annuity
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Immediate Income Annuity
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Deferred Income Annuity
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Features & Benefits
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Guaranteed fixed interest rate
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Range of investment choices
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Interest is credited to an index account based in part on the performance of an external index
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Guaranteed income begins within 13 months of contract issue
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Guaranteed income generally begins no earlier than 13 months after contract issue
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Tax-deferred growth
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Tax-deferred growth potential
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Tax-deferred growth
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Single purchase payment
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Flexible purchase payments
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Principal protection
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Market loss protection
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Focus
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Tax-deferred accumulation
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Tax-deferred growth or, if a guaranteed lifetime withdrawal benefit is elected, meeting predictable income goals
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Tax-deferred accumulation
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Immediate income needs
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Future Income Needs
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Death Benefit Protection
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Typically
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Depends upon annuity option chosen
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Most DIA options provide for a return of purchase payment(s) if you die before income payments begin. After annuity income payments begin, any death benefit payable will be based on the annuity option you have chosen
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Annuity Features & Benefits
Guaranteed Income
Annuities can provide a reliable and predictable stream of income, either for a specified period or for the rest of the annuitant’s life. This can be especially valuable in retirement, helping to cover living expenses.
Risk Management
Fixed and certain types of annuities offer protection against market volatility. Fixed annuities provide a guaranteed interest rate, shielding the principal from market fluctuations. Indexed annuities, while linked to market indexes, often have a floor that protects against losses.
Tax Advantages
Annuities offer tax-deferred growth, meaning that the investment gains are not taxed until the annuitant begins to receive payments. This can potentially allow for greater accumulation of funds over time.
Customization Options
Annuities come in various forms, such as immediate, deferred, fixed, variable, and indexed annuities. This variety allows individuals to choose the type of annuity that best aligns with their financial goals, risk tolerance, and preferences.
Longevity Protection
Annuities can help protect against the risk of outliving one’s savings by providing a guaranteed income for life. This addresses the concern of longevity risk, which is the risk of living longer than anticipated.
Death Benefit Options
Some annuities offer death benefit options, ensuring that beneficiaries receive a payout if the annuitant passes away. This can provide a level of financial protection for loved ones.
Stable Returns
Fixed annuities provide a fixed interest rate, offering stable and guaranteed returns on the investment. This can be attractive to individuals who prioritize capital preservation and a steady income.
Creditor Protection
In some jurisdictions, annuities may offer protection against creditors, providing an additional layer of financial security.
IMPORTANT DISCLOSURES
Guarantees are based on the claims paying ability of the issuing company.
**There is no additional tax-deferral provided when an annuity contract is used to fund a tax-qualified retirement plan. Investors should only buy an annuity contract for the annuity’s additional features, such as lifetime income payments and/or death benefit protection.
Taxable withdrawals are subject to ordinary income tax and, if made prior to age 59 ½, may be subject to an additional 10% federal income tax.
The information provided is not written or intended as specific tax or legal advice. FundaDream, its employees and representatives are not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel.
It’s important to note that annuities may not be suitable for everyone, and individuals should carefully consider their financial goals, risk tolerance, and specific needs before purchasing an annuity. Consulting with a financial advisor is recommended to determine if an annuity aligns with one’s overall financial plan.
Despite the positive qualities of Annuities, it’s essential to recognize that annuities also come with potential drawbacks, such as fees, surrender charges for early withdrawals, and varying levels of complexity. As with any financial product, individuals should carefully evaluate their own financial situation and goals, seeking advice from a financial professional before deciding if an annuity is the right fit for them.
Product availability varies by carrier, state, and individual eligibility. Not all products listed are available in all states or to all applicants. Product descriptions on this page are for general informational purposes only and do not constitute a solicitation or offer to sell any specific insurance or annuity product. All products are subject to underwriting approval and applicable state insurance regulations. Riders and benefits are subject to additional charges, terms, conditions, and limitations. Variable products involve investment risk, including possible loss of principal, and are sold by prospectus. FundaDream Insurance Solutions, Inc. is a licensed California insurance corporation. Consult the applicable carrier contract for full terms, conditions, and limitations. FundaDream’s charitable giving is made from general corporate revenues at the sole discretion of FundaDream leadership and does not constitute compensation to any licensed insurance professional.
Insurance products and services are offered through FundaDream Insurance Solutions, Inc., California License No. 0M95835