How to Pick an Annuity to Invest In

Shawn Plummer

CEO, The Annuity Expert

Annuities can be a game-changer for your retirement strategy, but the landscape is vast and sometimes confusing. “How to pick an annuity to invest in?” you might ask. We’re here to guide you with a human touch, focusing on what truly matters to you.

Confused About Annuities?

Are you new to annuities and unsure where to begin? Visit our Annuity Learning Lab for expert guidance and insights.

Understanding the Different Types of Annuities

Multi-year Guarantee Annuity (MYGA)

MYGAs are akin to CDs but in the annuity world. They guarantee a fixed interest rate for several years.

Example: Say you choose a 5-year MYGA. If it offers a 3% annual interest rate, your money will grow risk-free at this rate for the entire duration.

Fixed Indexed Annuity (FIA)

FIAs provide returns based on a market index, like the S&P 500, Nasdaq, or Dow Jones. It’s a way to benefit from market gains without direct market risks.

Example: If you select an FIA linked to the S&P 500 and this index grows by 8%, you’ll benefit from a part of that upswing.

Variable Annuity

A variable annuity is investment-driven. Your returns depend on the performance of your chosen investment options.

Example: Consider it a personal retirement account where the gains and losses reflect your chosen investments.

Immediate Annuity

With an immediate annuity, upon investing a lump sum, you start receiving payments almost immediately. It’s like creating your own pension.

Example: If you invest $100,000, you might receive a monthly income of $500 for life, depending on terms and age.

Embracing the K.I.S.S. Method

We recommend the K.I.S.S. method (Keep It Simple Stupid). Don’t get overwhelmed by jargon. Instead, focus on your goals and understand just enough to make an informed choice.

Key Tips for Making the Right Annuity Decision

Control Over Your Savings

  • Avoid annuitization if you want control. This makes your capital irretrievable but offers a lifetime income.
    • Example: Think of annuitization as buying a home. Once purchased, it’s tough to get your initial investment back, but you benefit from living there.
  • Opt for a lifetime income rider. This allows for potential income without losing control of your savings.

Safety and Security

  • Avoid a variable annuity if you’re uncomfortable with losing money and paying high fees.
  • Ensure there’s a lump sum death benefit. This ensures your beneficiaries receive the remaining funds if you pass away.
  • Always pick an A- or better-rated insurance company. It’s essential to ensure your provider is financially stable.

Performance Matters

Remember, there are more poor-performing annuities than great ones. Ensure you’re getting a product worth your investment.

Advisory Expertise

  • Don’t just work with any financial advisor; choose an annuity expert (like us).
    • Example: Would you trust a general doctor for heart surgery or prefer a cardiologist?
  • Steer clear of captive agents as they have a limited product selection. Independent advisors mean they can offer the best fit for you.

Making the Final Decision

Always align your annuity choice with your financial goals, risk tolerance, and retirement plans. And just as you wouldn’t trust your health to just anyone, ensure your financial future is in expert hands.

Next Steps

Choosing the right annuity isn’t just about understanding the financial landscape; it’s about aligning with your life goals and ensuring you’re in good hands. Take your time, consult with experts, and make a decision that offers peace of mind and security for your golden years. We’re here to help every step of the way.

How To Pick An Annuity To Invest In

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Frequently Asked Questions

Who has the best annuity rates right now?

The Annuity Expert has you covered with the best annuity rates you can currently find.

Is annuity income taxable?

Yes, annuity income is generally taxable. Payments usually consist of both principal and earnings; the earnings portion is subject to income tax. The principal amount is typically not taxed. Tax rules can vary, so consult a tax advisor for personalized advice.

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

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

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