An annuity is a contract between you and your insurance company designed to provide income when you retire. Annuities can help you save money on a tax-deferred basis; you pay no taxes on the earnings until you begin to withdraw the money.
Depending on your needs and objectives, different types of annuities are available:
A fixed annuity has a fixed rate of interest, with a guaranteed1 minimum interest rate that ensures the growth of your annuity will never be below this rate. This type of annuity may appeal to you if you have a low risk tolerance and are nearing retirement.
An indexed annuity is designed to take advantage of the potential gains of the market, while protecting your principal from downside risk. Indexed annuities are a good fit if you are looking for the safety of a fixed product along with index-linked earnings potential.
A variable annuity may provide greater tax-deferred growth potential for your money because you may allocate your premium across a range of investments. A variable annuity can be a great option if you are accumulating money for retirement.
Like other long-term investment strategies, annuities have two phases: accumulation and distribution. During accumulation, you are contributing to the annuity by either a one-time premium payment or periodic payments. At distribution,2 you begin to receive both principal and interest from your annuity. Depending on the type of annuity, you may receive income payments soon after the premium is paid (immediate annuity) or at a future date, such as retirement (deferred annuity). You can specify the amount of income to receive and the time period that best meets your needs, such as a lump-sum payment, income for a specified number of years or income for your lifetime.
If death occurs before all guaranteed1 income payments are received, any remaining guaranteed amount will be paid to your beneficiaries.
An annuity can help you feel more financially secure during your retirement years. Find an agent now to discuss whether annuities make sense for your retirement strategy.
1 The guarantees expressed on this Web page are based on the claims-paying ability of Farm Bureau Life Insurance Company.
2 Depending on which income payment option is selected and whether the annuity is qualified or non-qualified, you may need to pay federal income tax on any earnings withdrawn from the annuity and/or the principal withdrawn. Also, surrender charges may apply if funds are withdrawn before the annuity’s surrender charge period expires. IRS penalty if withdrawn before age 59½. Neither the Company nor its agents give tax, accounting or legal advice. Consult your professional advisers in these areas.