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simply asked - What is an annuity
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Annuities can be a safe and reliable way to protect your retirement money. Here are three key ways annuities provide safety:
1. Principal Protection
Many annuities, especially fixed and fixed indexed annuities, offer guaranteed protection of your original investment. That means the money you put in is not exposed to market losses. Even if the stock market drops, your principal remains intact—giving you peace of mind during uncertain economic times.
2. Guaranteed Lifetime Income
One of the most valuable features of an annuity is the option for guaranteed income for life. This ensures that you never outlive your money, no matter how long you live. Annuities can be set up to provide monthly income that continues for the rest of your life, and in some cases, for your spouse’s life as well. This protects against the risk of running out of funds during retirement.
3. Tax-Deferred Growth
Annuities grow tax-deferred, meaning you don’t pay taxes on the earnings until you withdraw the money. This allows your retirement funds to grow faster over time, since your investment compounds without being reduced by annual taxes. When used strategically, this can be a safer way to grow wealth consistently while preparing for future income needs.
Together, these features make annuities a secure option for building, protecting, and distributing retirement income. Would you like help determining which type of annuity best matches your financial goals?
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Annuities offer flexibility when it comes to accessing your money, especially in retirement. One important feature is the ability to make yearly withdrawals, including to meet Required Minimum Distributions (RMDs) for qualified retirement accounts like IRAs. Insurance companies structure annuities to comply with IRS rules, so if you’re over age 73 (as of 2025), you can withdraw your RMD amount annually without penalties—even if your contract has surrender charges.
In addition to RMD flexibility, many annuity contracts allow penalty-free withdrawals, typically up to 10% of the account value per year. This gives you access to funds while still preserving the rest of your principal.
Some annuities also include what’s called a “free-look” or satisfaction period, which can be up to two years with certain carriers. During this time, if you’re not happy with the performance or feel the annuity isn’t meeting your needs, you may be able to withdraw your money or switch to another option, often with little or no penalty. This adds an extra layer of consumer protection.
Think of an annuity like a “Super CD” or Time Account—but with tax advantages, income guarantees, and greater flexibility. Unlike a bank CD, annuities can grow tax-deferred and provide lifetime income, while still offering access to your funds when needed.
Would you like help reviewing options with longer satisfaction periods or stronger withdrawal flexibility?