Summary of Deferred, Fixed, and Variable Annuities

Annuities, in general, can be a great way to build additional income for retirement. Deferred annuities permit you to pay premiums over a period before payouts are received. There are a number of payout options available. A distinct benefit in most of the payout options is the ability to receive an income stream for as long as you live—income you cannot outlive. In addition, there are some distinct probate and tax advantages to deferred annuities as well. But penalties for early withdrawal of your capital make deferred annuities an option that is best for long-term investors.

Fixed annuities are one of the safest and most reliable ways to ensure guaranteed income after retirement and to transfer wealth outside of probate. The tradeoffs for guaranteed interest and income can be lower returns and lower liquidity than other investments. There might also be other tax-efficient means to transfer wealth that better match your financial goals. Once again, however, your choices depend upon what best achieves your particular objectives. If you need guaranteed income, you ought to weigh the pros and cons of a fixed annuity in your financial plan.

Like all annuities, variable annuities provide a tax-efficient way to provide reliable income for retirement; and for most annuities, they are one source of income you will not outlive. By allowing you to invest in accounts backed by securities, variable annuities provide an opportunity to realize better returns in exchange for accepting some market risk.