A fixed annuity is a contract between you and an insurance company that guarantees a specific interest rate and a minimum payout amount. This type of annuity offers more security, as your payments remain consistent over time.
Here's what you need to know:
Steady Income: With a fixed annuity, you'll receive regular payments that don't change, making it easier to plan for your retirement expenses.
Guaranteed Interest Rate: The insurance company promises a set interest rate on your investment, so you'll know exactly how much your annuity will grow over time.
Lower Risk: Fixed annuities carry less risk compared to variable annuities, as your payments aren't subject to market fluctuations.
A variable annuity allows your investment to grow based on the performance of underlying assets, such as stocks or bonds. While this can lead to potentially higher returns, it also comes with a higher level of risk, as payments can fluctuate depending on market performance.
Here are the main features:
Investment Options: Variable annuities offer a range of investment choices, allowing you to customize your portfolio based on your risk tolerance and financial goals.
Potential for Higher Returns: If the underlying assets perform well, your investment can grow more rapidly, potentially resulting in larger payments during retirement.
Market Risk: With a variable annuity, your payments can vary depending on how the assets perform in the market, which means your income may not be as predictable as with a fixed annuity.
When deciding between a fixed and variable annuity, CIFS will help you consider the following factors:
Risk Tolerance: If you prefer a more stable and predictable income, a fixed annuity may be the better choice. If you're willing to accept more risk in exchange for the potential of higher returns, a variable annuity could be the right fit.
Financial Goals: Consider your long-term financial objectives and how each type of annuity aligns with those goals. Fixed annuities can provide a secure foundation, while variable annuities offer the opportunity for growth.
Time Horizon: If you're nearing retirement and need a more immediate income source, a fixed annuity may be more suitable. If you have more time before retirement, a variable annuity can provide the potential for greater growth.
A CIFS agent will help you understand the key differences between fixed and variable annuities which is essential when planning for your retirement income. By considering your risk tolerance, financial goals, and time horizon, you can choose the right annuity type to help ensure financial security during your golden years.