Are Annuities Good or Bad?
What Is an Annuity and How Does It Work?
Are Annuities Good or Bad?
In this post, I will explain how annuities work and the 3 types of annuities, and the purpose they serve.
Ask yourself a question… for the people who put down annuities publically – what is it that they are selling? When you are nearing retirement.
Do you want more risk? Or less risk?
You don’t buy an annuity for the growth! You buy an annuity for the income in which you can NEVER outlive and diversify your retirement.
When is an annuity a good choice?
Like anything does not put all your eggs in one basket. The reality is many people have a misconception that annuities are a BAD thing, but they are not understanding the real purpose. People are living longer. An annuity or your brokerage account can and will run out of money at some point if you live long enough, but the annuity will NEVER stop giving you income (which is the #1 thing you need in order to retire.) If you could be rich or 100% guaranteed to never run out of income which would you choose?
Annuities Good or Bad
Hey welcome back my name is James johnson I’ve been a wealth advisor since 2003 I specialize in retirement and estate planning and what I want to talk to you today is I want to talk to you about that terrible thing called annuities everybody’s like oh annuities are terrible well the reality is is annuities serve a purpose but if we’re really going to understand how an annuity works, then we’re going to understand what an annuity is and the question I would ask you first is what is a cd. 
And a cd is what is called the certificate of deposit or as I more commonly refer to as a certificate of disappointment with a banking institute so what they do is you put your money in the institution and for a period of time six months a year three years five years whatever the case may be at a fixed rate for a fixed period of time and that cd each and every month grows and adds interest to your account. And if you surrender it early you pay a penalty for getting out now the downside To a cd is each and every year you get a 10.99 for any growth inside of that cd so then if that’s what a cd is then what in fact is an annuity all right so the definition of an annuity is an agreement between you and another party where the money is deposited and later returned in a series of payments well now that’s not necessarily true but we’ll follow that for just a minute because see there are three common forms of annuities the there’s a public annuity such as social security there’s a private annuity such as pensions and then there’s an asset-backed annuity which is with an insurance company and incidentally ultimately they’re all insurance-backed.
Annuities Good or Bad – So if we go over here and we look at this and we want to see what does an asset-backed annuity look like from an insurance company it would look like this we’re going to go in and it’s going to be held in either tank it can be held in what we call our yellow tank or our wrist tank because there’s no lid on it we get some evaporation or our green tank which is our safe tank because there is a lid on it and we don’t get any evaporation so the market affects our risk tank but it doesn’t affect our safe tank we can also hold it inside or outside of qualified plans so it could be an ira it could be a Roth ira and it could just be non-qualified money regardless of what it is it’s going to grow tax-deferred meaning that if it’s a Roth it’s going to grow tax-free if it’s.
Annuities Good or Bad – An ira it’s going to continue to grow tax-deferred and if it’s non-qualified money after-tax money we’re not going to get 1099 until we actually start withdrawing it now you get to decide how much to contribute you can contribute to either tank and then the how that account grows is based on what type of annuity is and we’re going to talk about those three types of annuities in a second now when it comes time to take the money out the one thing an annuity can do that nothing else can do is when it runs out of money it doesn’t run out of income and everybody’s always astonished at that fact how do they do that the reality is that is how it works now remember when it comes time to retire the one thing that we need in order to retire is a paycheck and what we really need is a paycheck that won’t run out so there are three types of annuities. 
Annuities Good or Bad
There’s a fixed annuity and so that is much like a cd so we put it inside of this account over here and they’re going to give us a fixed rate it’s sitting in a safe account so we’re getting a guaranteed interest rate that’s going to be a very small rate by comparison to other ways we can grow our money it’s going to be very similar to a cd but it’s going to have higher rates and it’s going to be tax-deferred if it’s non-qualified and it also tax-deferred if it’s qualified and tax-free if it’s a Roth ira it grows based on what the fixed interest rate is and there can be a different kind of riders and fees that are optional inside of it, for the most part, they’re pretty vanilla and most people are not going to use fixed annuities.
Annuities Good or Bad – Unless they’re just trying to grow their money safely for a short period of time so then there’s an indexed annuity and what an indexed annuity is we call them fixed indexed annuities because they’re not subject to the market they are in the green tank over here and they sit at that safe tank and then they grow according to what the market does but as you can see here that when the market goes down it goes sideways so we do not we never participate in the loss of the market yet when the market makes a huge gain we don’t participate in all of those gains we get reasonable gains no losses and you can see in this where you actually needed a puke bag to ride this ride here because this is up and down up and down and it was very very sporadic. and very uncomfortable for most people we were just taking a nice comfortable. for More Details. Click link.