How do Annuities Work? in 2022

Understanding Annuity Basics – How Do Annuities Work?

How do Annuities Work? But many retirees share common goals like nest egg protection and income stability. Annuities are one of the only safe-money products that can guarantee practical retirement solutions, such as protecting hard-earned dollars and generating income that cannot be outlived.

So, how does an annuity work?

An annuity is a contract between you and an insurance company; purchased in a lump sum or through a series of premium payments. Much like how you insure other valuable assets in your life like your car or your home. An annuity insures that your retirement money is safe from volatility and that you will have a reliable income source when you need it. There are a variety of annuities available that you can discuss with your financial professional. The two most common categories of annuities are fixed and variable annuities. These categories have different methods of earning interest on the contract value.

How do Annuities Work? – Variable annuities earn returns based on the performance of the investment portfolios. A return is not guaranteed and the contract value may go up or down.
Only fixed annuities guarantee an interest that will never be less than zero, even if the market goes down.

There are two common designs for these types of annuities fixed and fixed index annuities. A fixed annuity offers guaranteed growth at a fixed interest rate, established when you purchase the annuity or declared annually. A fixed index annuity offers additional interest growth opportunities, determined by a formula that is based on the performance of an external index. Both fixed and fixed index annuities offer a guaranteed minimum interest rate and tax-deferred growth.

How Do Annuities Work

That means your annual return will never go below zero due to index volatility, and your money grows tax-deferred up to the day you decide to take an income. When you are ready to take an income, these annuities offer a variety of income payment options, such as a lump sum or a series of payments over time. And, for additional lifetime income options, you can elect to add a rider to your annuity.

For a small fee, this benefit helps generate a reliable income source that cannot be outlived with a variety of payout options. This is a feature only available along with your annuity product. We have a saying at American Equity: if we wouldn’t sell the product to our mother we wouldn’t sell it to a client. Our focus is on providing products built with integrity So that our contract owners know when they go to sleep at night their money is safe and their future is secure


We call this sleep insurance.

American Equity is American-owned and operated, with a proven track record of financial stability, growth, and quality customer service. Our team is headquartered in West Des Moines, Iowa. Where we do not outsource our service; so, if you need us, call, and you will talk to an onsite team member in a timely manner. We have thousands of field partners licensed in every state.

Ask your financial professional about our annuities and if American Equity is the one who works for you!


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