An Annuity is an investment option that can provide a steady stream of guaranteed income for an individual (or spouse) for a certain period or the rest of their life. What draws many investors to annuities is that they are tax-deferred products purchased for a set period. They pay a specific amount each year throughout retirement based on the original amount invested and the investment strategy. There are several types of annuities, each with unique features and benefits. Read on to learn about each type and the best annuity rates!

What is an Annuity Rate?

From the initial purchase, an annuity grows each year. The annuity rate is the percentage by which your investment grows. The provider sets this rate and guarantees it for a set number of years. Some annuity types have fixed rates that act like a CD, while others have variable rates. Finding the best annuity rate is challenging, as these numbers constantly change!

The Different Types of Annuities

There are several types of annuities, and choosing the correct one depends on your financial goals and risk tolerance. 

1. Fixed Annuities

A fixed annuity is a predetermined investment with a guaranteed interest rate for a specific time. Your annuity rate is set upon purchase and remains the same. Fixed annuities are low-risk and provide predictable income for even the most conservative retirees and investors. While fixed annuities might not offer the highest rates, they are the best annuity rate in terms of guaranteed earnings. The longer you choose to invest, the higher your annuity rate will be!

2. Variable Annuities

When purchasing a variable annuity, you invest in various underlying funds such as stocks, bonds, or mutual funds. Variable annuities don’t have a guaranteed interest rate because their earnings depend on market performance. This means despite your initial investment, the amount you receive can fluctuate. Variable annuities are riskier than fixed annuities but have a potentially higher rate of return. 

3. Fixed Indexed Annuities

Fixed index annuities are a mix of fixed and variable annuities. The return on these investments depends directly on the performance of an index such as the S&P 500. Indexed annuities limit the downside of investments by protecting against market losses and providing a guaranteed minimum return while also including a variable rate if the market is favorable. These investments can have higher rates of return than traditional fixed annuities yet come with more risk. 

4. Immediate Annuities

An immediate annuity is like a life insurance policy paid to a living person. You make a lump sum payment to an insurance company, and they provide you with a guaranteed regular income stream starting immediately. These payments include partial payback of the principal, so they are generally higher and have favorable tax treatment. Immediate annuities help individuals protect their savings against potentially outliving their income. 

5. Deferred Annuities

Deferred annuities are investments purchased that promise to pay the investor a regular income later, greater than one year from the investment. These are ideal for those who want to keep working now and don’t need a guaranteed income until the future. 

Investments and retirement planning require careful consideration. It is an individualized process, and you must select the ideal annuity based on features, benefits, and drawbacks. Consulting an experienced financial advisor such as DeWitt and Dunn can help you make an informed decision that aligns with your long-term goals. 

How DeWitt and Dunn Can Help

Do you want to invest in an annuity to further your financial and retirement goals but don’t know how to find the best annuity rates? Maybe you want to consider your options or learn more. DeWitt and Dunn are here to help! Our professional team has decades of experience advising clients and planning comfortable retirement investments. Visit our website and contact DeWitt and Dunn today to learn more about the best annuity rates and how to plan your assets to work with your retirement goals! 

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