How Annuities Work: A Smart Way to Secure Retirement Income

Planning for retirement can feel overwhelming—but it doesn’t have to be. Annuities are powerful financial tools that can help you create a guaranteed income stream for life, so you can enjoy retirement with confidence and peace of mind.

What Is an Annuity?

An annuity is a contract between you and an insurance company. You make either a lump sum payment or a series of payments, and in return, the insurance company agrees to pay you income—either right away or in the future.

Annuities are designed to help protect your retirement savings and ensure that you don’t outlive your income.

🔁 Deferred vs. Immediate Annuities: What’s the Difference?

⏳ Deferred Annuity

A deferred annuity is designed for those who want to grow their money now and receive income later, usually in retirement.

How it works:
You invest a lump sum or make ongoing payments. Your money grows tax-deferred, and you choose a future date to begin receiving income—often aligned with your retirement date.

✅ Ideal for:

• People planning for future retirement

• Younger investors with time to grow savings

• Anyone looking for tax-deferred growth

💸 Immediate Annuity

An immediate annuity starts paying you income almost right away, usually within 30 days to 1 year after you invest a lump sum.

How it works:
You pay a one-time premium, and the insurance company starts sending you regular payments for life or a set period—guaranteed.

✅ Ideal for:

• Retirees who need income now

• People who recently rolled over a 401(k) or lump sum

• Anyone wanting to lock in lifetime income

Fixed vs. Indexed Annuities: Understanding the Options

🔐 Fixed Annuity

A fixed annuity offers a guaranteed interest rate and consistent, predictable income. It’s safe, simple, and not affected by the stock market.

How it works:
Your principal is protected. The insurance company guarantees a set rate of return and steady income payments.

✅ Ideal for:

• Conservative investors

• People who want risk-free, predictable income

• Retirement savers looking for stability

📊 Indexed Annuity

An indexed annuity offers growth potential based on a stock market index (like the S&P 500), but with built-in protection from market losses.

How it works:
Your annuity earns interest based on the performance of an index, but you’ll never lose money due to a market downturn. You may have caps or participation rates that limit gains, but your principal is protected.

✅ Ideal for:

• Investors seeking growth with protection

• People wanting better returns than a fixed rate

• Those near retirement who want to avoid market risk

💬 Which One Is Right for You?

Your choice depends on when you want to receive income and how much risk you’re comfortable taking. Here’s a quick breakdown:

🎯 Key Benefits of Annuities

💵 Guaranteed Lifetime Income – Know exactly how much you’ll receive each month
📈 Tax-Deferred Growth – Pay no taxes until you withdraw your money
🛡️ Protection from Market Risk – Especially with fixed and indexed annuities
💖 Peace of Mind – Never worry about running out of money in retirement
📊 Flexible Options – Choose when and how you want to receive income

🤝 Let’s Build Your Retirement Income Strategy

Every person’s retirement journey is unique. We’re here to help you choose the right annuity that fits your needs, goals, and timeline. Whether you’re planning 10 years ahead or retiring next month, we can help you create a plan that delivers confidence, security, and guaranteed income for life.

📞 Contact us today at 214-957-2240 to schedule your free annuity consultation!