The secret to feeling good about your retirement is being certain you’ll have money for as long as you live. An annuity is a tax-deferred tool that can guarantee you an income even if you live to be 100. It’s a great way to help fill the gap between what you currently have coming to you—through pensions, Social Security, savings—and what you’ll actually need to live.
What Is an Annuity?
An annuity is a contract between you and an insurance company. The insurance company invests your money for you, and, depending on your annuity, you may receive a regular payment based on the success of the investments. Income on annuities is not taxed until withdrawn from the contract, making annuities a tool to save for retirement.
Types of Annuities
The two main types of annuities are fixed and variable.
Fixed Annuities
A fixed annuity provides a guaranteed interest rate* for a fixed period of time. Here’s how it works: You give a check to an insurance company, and they invest it. The interest rate you are paid will be periodically adjusted up or down, but it will never go below the guaranteed rate. As a result, you will always receive a guaranteed minimum level of return.
Variable Annuities
A variable annuity is a contract with an insurance company where you give them either a lump sum or series of payments—and they return your money, usually after retirement, with a steady stream of payments. In the meantime, your money is invested and is free to grow, tax deferred, until you take the money out. Variable annuities provide more options for investing your money, so potential returns are higher than fixed annuities, but the risk is also greater.
| Other Annuities Within the categories of fixed or variable annuities, other options are available: Immediate Annuities Indexed Annuities Market Value–Adjusted Annuities How an Allstate Personal Financial Representative Can Help |
| An Annuity Might Be Right for You If You: |
| • Have maxed out your contributions to 401(k)s and IRAs.
• Like the idea of having your annuity pay out periodically, like a paycheck, after you’ve retired. • Have someone in your life you want to assure is taken care of financially after you are gone. • Are comfortable leaving a chunk of your money untouched for at least 7–10 years. • Are fairly certain you will not withdraw the money before you’re 59½. |
*Guarantee is based on claims paying ability of insurer.
Variable annuities are long-term investments designed for retirement purposes. You should carefully consider the investment objectives, risks and charges and expenses of the investment alternatives before purchasing a contract or investing money. This information is only a summary. Additional information about these and other subjects can be found in the prospectuses for the contract and the underlying portfolios. You may obtain copies of these prospectuses from your Allstate Personal Financial Representative. Please read the prospectuses carefully before purchasing a contract or sending money.
