What Is An Annuity? How Do Annuities Work? (Learn The Basics)

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

What is an annuity?

At the very basic level, an annuity is a contract between you and an insurance company that provides a fixed income stream to the annuitant. This insurance policy offers a way to address the risk of outliving savings, making it a popular choice for retirement purposes.

In reality, the annuity can offer much more than just a reliable income stream in retirement, and by the end of this guide, you will learn how annuities work at a high level and decide whether they’re a good fit or not.

Annuities can be purchased with either a lump-sum payment (cash, transfer, or rollover) or monthly premiums (like a retirement savings plan), allowing individuals to customize their investment approach. These retirement vehicles come in different forms and structures and aim to provide a reliable income source.

To avoid confusion, the income from an annuity can be paid to the annuitant in a lump sum or a series of payments, depending on the type of contract.

There are various types of annuities, including immediate and deferred annuities. Immediate annuities start paying out income immediately (within 12 months), while deferred annuities delay payments until a future date (after 12 months). This flexibility allows individuals to choose the annuity that best aligns with their retirement goals and timeline.

Investors often opt for annuities as insurance policies to ensure a steady income during retirement. By investing in annuities, individuals can provide themselves with a reliable source of income, helping to address the uncertainties that can come with retirement.

Annuity TypePayment Start Date
Immediate AnnuityPayments start right away
Deferred AnnuityPayments start at a future date

Key Takeaways

  • Annuities are insurance contracts that offer a reliable income stream for retirement purposes.
  • They come in different types: immediate or deferred, fixed or variable.
  • Annuities provide tax deferral on investment earnings and protection from creditors.
  • Investors can choose between lump-sum payments or monthly premiums to fund annuities.
  • Annuities can ensure your spouse has financial support if you pass away.
  • Understanding annuities’ features, benefits, and considerations is crucial for retirement planning.

What does “annuity” mean?

Essentially, “annuity” refers to these systematic payments, helping individuals manage the risk of outliving their savings by ensuring a consistent income stream. Different annuity types suit varying financial strategies and risk levels.

An example of annuities is the lottery. If a winner chooses the payout option, the lottery uses an annuity to distribute the payments over time, typically 30 years.

How long have annuities been around?

Annuities have existed for centuries, with origins tracing back to ancient Rome. They became more formalized in the 17th century by establishing European annuity markets.

In perspective

  • The IRA was created in 1974.
  • The 401k was created in 1978.
  • The Roth IRA was created in 1997.

How An Annuity Works

Annuities are financial products that go through two distinct phases: the accumulation phase and the annuitization phase. Understanding how these phases work is crucial for anyone considering an annuity as part of their retirement planning strategy.

The Accumulation Phase

During the accumulation phase, investors fund their annuity by making either lump-sum or regular premium payments. The funds invested in the annuity grow tax-deferred, meaning that any earnings from the investment are not subject to current income taxes. This allows for potential growth over time without the immediate burden of taxation.

Depending on the type of annuity, investors may be able to choose from a variety of investment options to control how their money is invested during the accumulation phase. These options include stocks, bonds, mutual funds, and other financial instruments. By diversifying their investments, investors can potentially increase their chances of achieving higher returns.

The Annuitization Phase

Once the accumulation phase is complete, the annuity enters the annuitization phase or distribution phase. This is when the annuitant (the person who purchased the annuity) begins to receive payments. The annuitant can choose to receive payments for a fixed period of time, such as 10 or 20 years, or for the rest of their life.

Takeaway: The annuitization phase is optional in most annuity products, and owners can choose to “walk away” from the contract (investment and interest) in a lump sum after the agreed period. Most elect the annuity lifetime income rider if they want a guaranteed income because they offer more “bells and whistles.”

How Annuities Work

The Main Types of Annuities

Annuities come in many types, each offering different features and benefits. Below are the four primary annuity types.

Fixed Annuity

fixed annuity is a type of annuity that offers a guaranteed interest rate over a specific period. It provides a stable and predictable fixed income stream, making it suitable for individuals who prefer a conservative investment approach. The rate of return on a fixed annuity is not dependent on market performance (except for fixed-indexed annuities), which offers protection against market volatility.

Related Reading: Compare Today’s Best Fixed Annuity Rates

Variable Annuity

variable annuity allows investors to allocate their funds among various investment options such as stocks, bonds, and mutual funds. The return on a variable annuity is based on the performance of these underlying investments, offering the potential for higher returns but also exposing the investor to market risk. Variable annuities suit individuals comfortable with market fluctuations and seeking long-term growth.

Immediate Annuity

An immediate annuity provides regular income payments that start immediately after the annuity is purchased. It is often used by individuals already in retirement who want to convert a lump sum of money into an irrevocable income stream. Immediate annuities offer the advantage of providing income immediately but do not allow for further contributions once the contract is initiated.

Deferred Annuity

deferred annuity delays income payments until later (lump sum or a series of payments), allowing the invested funds to grow tax-deferred. It is commonly used for retirement planning, enabling individuals to accumulate wealth over a specified period. Deferred annuities offer flexibility in contribution amounts and timing, making them suitable for individuals who want to save for the future but do not immediately need income from the annuity.

What Is An Annuity?

Comparison of Different Types of Annuities

Annuity TypeGuaranteed IncomeMarket RiskTiming of Income PaymentsFlexibility
Fixed AnnuityYesNoBegins at a predetermined dateLimited
Variable AnnuityNoYesDependent on market performanceHigh
Immediate AnnuityYesNoStarts immediately after purchaseLimited
Deferred AnnuityNoNoDelayed until a later dateHigh

Compare The Best Annuity Payouts

Compare actual annuity payouts from over 25 insurance companies based on which type of annuity best suits your personal needs.

Annuity Contract Features

When considering annuities, it’s important to understand the various contract features that can impact your investment. Here are some key features to consider:

Tax Deferral

Annuities offer tax deferral on investment earnings, allowing for potential growth without immediate taxation. This means you won’t have to pay taxes on your investment gains until you start receiving payments from the annuity. This tax advantage can help your investment grow over time, potentially boosting your retirement savings.

Protection from Creditors

Another important feature of annuities is their ability to offer some level of protection from creditors. This means that in the event of a lawsuit or bankruptcy, the funds in your annuity may be shielded from being used to satisfy your creditors’ claims. The level of protection can vary depending on the state you live in and the type of annuity you have, so it’s important to consult with a financial advisor or attorney to understand the specific protections available to you.

Investment Options and Tax-Free Transfers

Annuities provide various investment options, allowing you to choose how your money is invested. Depending on your risk tolerance and investment goals, you can allocate your funds to asset classes such as stocks, bonds, or a combination. Additionally, annuities often offer the flexibility to transfer funds tax-free, among investment options. This allows you to adjust your investment strategy without incurring any tax consequences.

Contract FeaturesBenefits
Tax DeferralAllows for potential growth without immediate taxation
Protection from CreditorsProvides some level of asset protection
Investment OptionsAllows for customization of investment strategy
Tax-Free TransfersProvides flexibility in asset allocation
No contribution limitsThere are no limitations on how much you can contribute

Understanding these contract features can help you make informed decisions when considering annuities as part of your retirement planning. It’s essential to carefully review the terms and conditions of any annuity contract and consult with a financial professional to ensure that it aligns with your financial goals and objectives.

Benefits and Considerations

When considering annuities, it’s important to understand their various benefits and potential considerations. Here are some key points to keep in mind:

Lifetime Income:

Annuities provide a guaranteed stream of income for the annuitant’s lifetime. This can be particularly advantageous for retirees concerned about outliving their savings. With an annuity, you can have peace of mind knowing you’ll receive regular payments as long as you live.

A Dummies Guide To Understanding Annuities

Benefits to Heirs:

Annuities also offer benefits to heirs. Depending on the type of annuity, you may have the option to name a beneficiary who will continue to receive payments (lump sum or series of payments) after your passing. This can support your loved ones financially and ensure that your assets are distributed according to your wishes.

Tax Implications:

It’s important to consider the tax implications of annuities. While they offer tax-deferred growth, meaning you won’t pay taxes on investment earnings until you receive payments, withdrawals before a certain age may incur penalties. Additionally, annuity payments are generally subject to income tax. Consulting with a tax advisor can help you navigate the tax aspects.

Surrender Fees:

Some contracts may have surrender fees, which can limit liquidity during a specified surrender period. You may incur fees or penalties if you need access to your funds before the surrender period ends. It’s essential to carefully review the terms and conditions of any annuity contract and consider your financial flexibility needs.

Annuities Definition And Meaning

Annuities vs. Life Insurance

Annuities and life insurance are two popular options for long-term financial planning. While both serve different purposes, they are crucial in addressing mortality and longevity risks. Here, we’ll explore the key differences between annuities and life insurance, allowing you to make informed decisions based on your specific needs and goals.

Annuities: Managing Longevity Risk

Annuities are designed to address the risk of outliving your savings by providing a guaranteed income stream for as long as you live. By purchasing an annuity, you can ensure a steady flow of payments throughout your retirement years, offering financial security and peace of mind.

Life Insurance: Protecting Against Mortality Risk

On the other hand, life insurance is a form of financial protection for your loved ones in the event of death. By paying regular premiums, you can secure a death benefit that will be paid out to your designated beneficiaries. Life insurance provides financial support to cover expenses such as funeral costs, outstanding debts, and ongoing living expenses for your family. It offers peace of mind knowing that your loved ones will be cared for in your absence.

Annuities and life insurance have distinct purposes that allow individuals to manage mortality and longevity risks within a comprehensive financial plan. Consult with a financial advisor to determine the optimal balance between annuities and life insurance based on your specific circumstances and objectives.

AspectAnnuitiesLife Insurance
Primary PurposeAddress longevity risk by providing a guaranteed income stream throughout retirement.Provide financial protection for loved ones in the event of the policyholder’s death.
PaymentsRegular income payments for as long as the annuitant lives or for a fixed period.Multiple policy options and riders are available to tailor coverage.
Risk CoverageAddresses the risk of outliving savings and provides ongoing financial security.Covers the financial needs of beneficiaries after the policyholder’s death.
Tax TreatmentGenerally offers tax-deferred growth on investment earnings.Death benefits are generally tax-free for beneficiaries.
FlexibilityVarious types available, allowing customization to individual needs and goals.Various types are available, allowing customization to individual needs and goals.

Annuity Regulations and Suitability

Essential regulations govern annuities to protect consumers and ensure that these financial products are suitable for their needs. The Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) oversee the regulation of annuities.

Agents or brokers who sell annuities must hold state-issued life insurance licenses and may also require securities licenses for variable annuities. This ensures they have the necessary knowledge and expertise to advise consumers appropriately. These licensing requirements help maintain professionalism and accountability in the industry.

In addition to licensing requirements, annuity contracts also have suitability requirements. This means that agents or brokers must assess whether an annuity suits the purchaser’s financial situation, goals, and risk tolerance. This helps prevent individuals from being sold annuities that may not be appropriate for their circumstances.

The Importance of Suitability

The suitability of an annuity is crucial because these financial products can have complex features and fees that may not be suitable for everyone. An agent or broker must consider factors such as the consumer’s age, income, investment objectives, and time horizon. Ensuring that an annuity is suitable makes consumers more likely to make informed decisions and avoid potential pitfalls.

Overall, the regulations surrounding annuities and their suitability requirements aim to protect consumers and ensure they are provided with appropriate investment options. By working with licensed professionals and considering individual financial goals, individuals can make well-informed decisions when purchasing annuities and planning for retirement.

Benefits of Annuity Regulations and SuitabilityConsiderations
Protection for consumersPotential limitations in investment options
Professionalism and accountability in the industryAdditional time and effort to assess suitability
Prevention of unsuitable annuity salesComplexity of annuity features and fees
Increased consumer knowledge and awarenessNeed for ongoing review and evaluation

Why Do People Buy Annuities?

Having familiarized ourselves with the standard definition of annuities, it’s time to delve into their practical applications in daily life. As an annuity broker and trainer since 2009, I’ve accumulated over a decade of experience educating clients and facilitating annuity sales. My journey has revealed that annuities aren’t just retirement tools but versatile financial instruments capable of solving various financial challenges. So, how exactly can an annuity be utilized beyond retirement planning? Let me share the insights I’ve gained, exploring the diverse and often overlooked ways annuities can enhance financial security and flexibility.

The Biggest Myth About Annuities

A common criticism about annuities is that they make you lose control of your money, but that’s not true. Most plans let you take your investment and earnings in a lump sum or as a series of payments at the end of the contract term.

  • Complexity: Due to their flexibility, annuities can be complex, but financial professionals can help investors understand their options.
  • Not for High-Net-Worth Investors: Contrary to belief, high-net-worth investors are often likely to purchase annuities.
  • One-Size-Fits-All: There are various types with different rules, limits, and rider options, allowing customization based on individual goals.
  • Only for Retirees: Both current and future retirees find value in annuities, especially those offering lifetime guarantees.
  • Lack of Inflation Adjustment: Some plans allow changes in income amounts to meet changing needs.
  • Lack of Emergency Access: Most permit annual penalty-free withdrawals up to a certain percentage, though full access is restricted until the surrender period ends.
  • Expensiveness: The fees are relatively low compared to most investments and retirement plans. Owners pay fees to provide death benefit protection and income guarantees, offering security not present in other investment options.
Annuities Explained

Conclusion

Now that you have this “understanding annuities for dummies guide,” know that these financial tools are the only vehicle that offers guaranteed income for retirement. Still, weighing their benefits against fees and liquidity constraints is crucial. Tailoring an annuity to your financial goals is key, and seeking advice from a financial advisor (like The Annuity Expert) can be immensely helpful. For a clearer picture and a personalized approach to annuities, contact us today for a free quote, and use our annuity calculator to help estimate your payments.

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Questions From Our Readers

What are annuities?

Annuities are financial products that provide a steady income stream for a set period or the rest of your life. They are typically purchased from insurance companies and can be structured differently, such as fixed or variable annuities. Annuities are often used as a retirement income source, allowing individuals to receive regular payments.

What is the basic function of an annuity?

The basic function of an annuity is to provide a steady stream of income, typically for retirement.

How do annuities work for dummies?

An annuity has an accumulation phase and an annuitization phase. During the accumulation phase, investors fund the annuity, and the investment grows tax-deferred. In the annuitization phase, the annuitant begins receiving payments for a fixed period or the rest of their life.

What are the different types of annuities?

Annuities can be categorized into different types based on their structure. They can be fixed or variable, providing either regular periodic payments or payments based on investment performance. Payments can also be immediate or deferred.

What are the features of an annuity contract?

Annuities offer tax deferral on investment earnings, allowing for potential growth without immediate taxation. They also protect from creditors, offering some level of asset protection. Annuities offer various investment options, allow for tax-free transfers among investment options, and provide lifetime income, guaranteeing a steady stream of payments for as long as the annuitant lives.

What are the benefits and considerations of annuities?

Annuities offer benefits to heirs, allowing payments to continue after the annuitant’s death. However, there are tax implications, and withdrawals before a certain age may incur penalties. These long-term contracts may also have surrender fees, which can limit liquidity during a specified surrender period.

How do annuities compare to life insurance?

Annuities address longevity risk, ensuring income for as long as the annuitant lives, while life insurance provides a death benefit to the policyholder’s family upon their death. Both insurance policies serve different purposes, although life insurance companies often offer annuity products as a natural hedge to their insurance products.

How are annuities regulated, and what are the suitability requirements?

Annuities are regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). Agents or brokers selling annuities must hold state-issued life insurance licenses and may require securities licenses for variable annuities. Annuity contracts have suitability requirements, ensuring they are appropriate for the purchaser’s financial situation and goals.

Are annuities investments?

Yes, annuities are either insurance-based or investment-based.

What is the annuity definition?

An annuity is a financial product that pays out a fixed stream of payments to an individual, typically used as an income stream for retirees.

What does annuity mean in Latin?

“Annuity” derives from the Latin word “annuitas,” which means “annual payment,” and is related to “annus,” the Latin word for “year.”

What does an annuity protect the annuitant against?

An annuity protects the annuitant against outliving their income by providing regular payments for life or a specified period.

What is an annuity primarily designed to protect?

An annuity is primarily designed to protect against outliving one’s savings. It guarantees a steady income stream over a specified period or for the rest of one’s life. Individuals can contribute to an annuity during their working years and receive regular payments upon retirement, providing financial security and stability.

Which two basic annuity products do insurance companies offer?

Insurance companies offer two basic annuity products: fixed annuities and variable annuities. Fixed annuities provide a guaranteed interest rate for a specified period, while variable annuities offer investment options with potential growth but also come with market risks. These annuity products can provide individuals with different options for their retirement income planning.

What is an annuity account?

An annuity account is a financial product that offers a steady stream of income during retirement. It is typically purchased from an insurance company and involves making regular payments over a period of time. The funds in an annuity account grow tax-deferred until withdrawals begin, making it a popular option for individuals seeking reliable income in retirement.

Can you cash in an annuity for a lump sum if you receive monthly payments?

If your annuity payments are from a lifetime income rider, you might be able to take out the remaining value in a lump sum, depending on the specific terms of your contract. However, if the payments are annuitized, you generally cannot convert them back into a lump sum through the issuing company. In this case, an option could be selling your future payments to a third party, although this usually comes at a cost and may not offer full value.

Why won’t my annuity allow me to withdraw money?

Most annuities do allow withdrawals, either with or without a surrender charge, depending on the terms of the contract. However, if your annuity has been annuitized, meaning it has been converted into a stream of periodic payments, this process is generally irrevocable. In annuitized annuities, the option for liquidity, like making withdrawals, is typically no longer available.

How are annuities protected?

Annuities are protected by two main methods. First, the insurance company that issues the annuity is responsible for its security, so choosing a financially stable company is important. Second, if the insurance company fails, State Guaranty Associations (SGAs) offer some protection, but this has limits and varies by state.

How do I see my annuity’s progress?

To track the progress of your annuity, you can typically review statements provided by the annuity issuer. These statements typically detail the current value of your annuity, any contributions made, fees deducted, and the performance of the underlying investments, if applicable. Additionally, you can often access account information online through the annuity provider’s website or by contacting their customer service.

Is an annuity only for retirement, or can I receive payments from an annuity purchased in my mid-40s in the same year?

An annuity is not solely for retirement; you can indeed purchase one in your mid-40s and start receiving payments within the same year. This is known as an immediate annuity. The tax implications depend on how you fund the annuity. If you use cash (after-tax dollars), the taxes on payouts will be minimal, typically only on the earnings portion. However, if you use funds from a tax-deferred retirement account, like a traditional IRA or 401(k), to purchase the annuity, withdrawals could be subject to regular income tax, and if you’re under 59½, you might also face a 10% early withdrawal penalty on the amount used.

How is the monthly income guaranteed in annuities?

Insurance companies pool the risks among all annuity holders. By collecting premiums and investing them, the company manages the risk of someone living longer than expected and needing more payments. The money from all the policyholders helps balance this out. This way, insurance companies can promise to pay you the income agreed upon in your annuity contract, and this isn’t affected by market changes or other external factors.

What is meant by the premium amount in an annuity?

The premium amount in an annuity refers to the money you pay into the annuity contract. This can be a single lump-sum payment or a series of payments made over time.

What is a single-life annuity?

A single-life annuity refers to two types of annuities. The first type is an annuitized annuity that provides a stream of income for the lifetime of one individual, with no death benefit for beneficiaries. The second type is an annuity with a Guaranteed Lifetime Withdrawal Benefit, which also provides income for one person’s life but allows for the remaining account balance to be passed down to beneficiaries upon the annuitant’s death. Despite the differences in beneficiary options, both types are labeled as single-life annuities because the income is designed to support a single individual’s lifetime.

What is the best annuity for me to take for income for the rest of my life?

The best annuity for generating income for the rest of your life, especially if you’re seeking protection against stock market losses, the potential to earn interest, control over your money, and a death benefit, might be a fixed indexed annuity with a Guaranteed Lifetime Withdrawal Benefit (GLWB). This type of annuity offers a balance between growth potential and protection. The GLWB ensures a steady stream of income for life, while the indexed component allows your investment to grow based on a stock market index but with protection against market downturns. Additionally, you retain control over your principal to some extent, and your beneficiaries have a death benefit.

Can we draw out the interest monthly from an annuity?

Yes, you can draw out the interest monthly from an annuity, particularly if you have a fixed, fixed indexed, or variable annuity. There are a couple of ways to do it. One is through systematic withdrawals, where you set up regular withdrawals that can include the interest earnings. Another option is a Guaranteed Lifetime Withdrawal Benefit (GLWB) rider if your annuity offers it. This rider lets you withdraw a certain percentage of your annuity’s value each year, including interest, for life.

What happens if you buy an annuity and run out of money?

If an annuity is purchased without a GLWB and funds are exhausted, the annuity cease. In contrast, if the GLWB is added, the insurance company guarantees continued payments at the agreed rate or potentially better, ensuring a steady income regardless of the annuity’s balance.

What happens if I take a loan out on my annuity and don’t pay it back?

If you don’t repay a loan taken against your annuity, the insurance company will typically reduce the value of your annuity by the amount of the outstanding loan plus interest. This reduction will affect the future income you can receive from the annuity. Additionally, the policy could lapse if the loan plus the accrued interest exceeds the annuity’s cash value. A lapse terminates the annuity and could lead to tax consequences if the unpaid loan amount is considered a distribution.

Can an annuity be used to guarantee the repayment of a loan?

Yes, you can use an annuity to guarantee the repayment of a loan by utilizing an annuitization payment through an immediate annuity. When you annuitize, the annuity converts into an irrevocable stream of regular payments. These payments can be structured to align with your loan repayment schedule.

Does it cost anything to ask questions about an annuity?

Typically, asking questions about an annuity should not cost you anything. Good financial advisors or annuity brokers usually don’t charge for answering questions related to annuities. Their role often includes providing information and guidance to help you understand different annuity products and how they may fit into your financial plans. However, it’s important to be respectful of their time.

Can I use my annuity to buy a car?

Yes, you can use funds from your annuity to buy a car. However, if you withdraw money from your annuity before reaching a certain age, typically 59½, you may be subject to an early withdrawal penalty from the IRS (10%).

Can you choose your own investments for your annuity, such as selecting your own stock portfolio, if it is a variable annuity?

Typically, you can choose your investments from a pre-determined selection of investments in a variable annuity and a predetermined selection of indexes in an indexed annuity.

If you have an annuity and are 71 years old, do you need to take withdrawals at a specific age?

If your annuity is within an Individual Retirement Account (IRA), then you are subject to Required Minimum Distributions (RMDs) starting at age 73.

Are there annuity contracts that permit collateral assignment without triggering tax consequences?

Typically, under IRS rules, placing a collateral assignment on an annuity policy can trigger a taxable event. This means that using an annuity as collateral for a loan might lead to tax implications on the amount that is considered to be an ‘economic benefit’ to the annuitant. While the basis in the annuity does get stepped up, ensuring that it’s not taxed twice, it does mean that the taxes could be incurred earlier than they would be otherwise.

Do you have to pay commissions when purchasing an annuity?

No, you do not directly pay the commissions when purchasing an annuity. The insurance company pays the commissions to the broker or agent who sells the annuity. The insurance company’s actuaries factor these commissions into the pricing and terms of the annuity product. These commissions do not directly affect the performance or value of the annuity contract. Essentially, the commission cost is built into the product itself, and as the buyer, you don’t pay a separate commission fee.

If your annuity is nearing its expiration, when is the latest you can start the application process to transfer it without withdrawing the funds and incurring an early withdrawal penalty?

After the surrender period of your annuity expires, you won’t face early withdrawal penalties from the insurance company for transferring or withdrawing funds. Additionally, if you’re over 59½ years old, you generally won’t face the IRS early withdrawal penalty. If you’re considering transferring the annuity, it’s unnecessary to do so immediately upon the surrender period’s expiration to avoid penalties. You can choose to leave the funds in the account, often in a continued accumulation phase, and decide later when to transfer. However, it’s wise to start the transfer process before your annuity contract automatically renews or shifts to a different interest rate or term, if applicable.

Can I borrow against my union annuity?

The ability to borrow against a union annuity depends on the specific terms and rules set by the union that administers the annuity. Some union annuities may allow loans against the accrued value, while others may not. It’s important to check directly with your union’s benefits administrator or refer to your annuity plan’s documentation to understand the specific provisions regarding loans.

Can I roll my current annuity into an indexed life insurance plan with cash value?

No, you can not roll an annuity directly into a life insurance policy. However, you can use the penalty-free withdrawals or annuitize the contract to fund the policy each year.

Are there any annuities that are not a bad investment?

Yes, many find fixed indexed annuities (FIAs) to be appealing due to their combination of features from different types of annuities. FIAs offer a fixed interest rate, similar to fixed annuities, while also allowing for the earning of interest based on stock market indices, akin to variable annuities, but with the added benefit of principal protection. They can provide immediate income like immediate annuities and deferred income similar to deferred income annuities (DIAs) or pension plans. Additionally, FIAs can offer an enhanced death benefit, serving as an alternative to life insurance, and can even include options for long-term care, making them a versatile choice for many looking for a balance of growth potential, income security, and additional benefits.

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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