“Hi. I’m financial advisor Danny Goolsby, and today we’ll be talking about annuities. An annuity is a contract with an insurance company. And what you’re doing is you’re trading something for something else. So how they work. you exchange a sum of cash to the insurance company for the promise of them making payments to you for a predetermined amount of time in the future. This time maybe for your life. It may be for a what’s called a Period Certain Event, that which may be a 5 or 10 year period or a 20 year period.  

Annuities help you manage different kinds of risk. The risk could be volatility from the stock market. That risk could be tax risk. That risk could be longevity of life. So the longer you live, the more uncertain your income might be from other sources. And the annuity can make that promise where you will never outlive your money.  

There are several different types of injuries. These range from a Variable Annuity that attaches some of your growth to the stock market. There could be a Deferred Fixed Annuity where there is no risk to the downside from the market. But it does give you a lesser opportunistic growth rate because it’s not tied to the market. It’s just an interest-bearing account. There’s also a Deferred Annuity, which is your deferring the taxes on the growth of the money. And then there’s an Intermediate Annuity, which means you want the income to start immediately from this account.  

So let’s talk about fees when it comes to annuities. Some annuities, depending on what kind they are, will have more fees. And some annuities will have less fees, even including no fees on the annuities. The Variable Annuities, a lot of times, will have fees, and they can be quite expensive because the insurance company is making you promises based on your growth. There are also different kinds of riders on these accounts. For example, you can have what’s called a Living-Benefit Rider. You could have a Return Of Premium Rider. You can have all kinds of different riders, but the more riders you have on your account, the more expensive the account usually is.  

Let’s talk about taxes when it comes to annuities. Taxes on annuities are usually deferred. If you are in a Deferred Annuity, you are deferring the ability to pay taxes until some point in the future, usually, when you start taking money out of them, the deferred annuity allows you to have better growth because you are deferring taxes, which leaves you more principal for you to grow.  

There was a commercial out back in the 1990s talking about a particular car manufacturer that said, “This car is no longer the car that your father or your grandparents bought.” You could apply that same type of thinking to annuities. Annuities today have evolved just like any other financial product. Are there good ones out there? Yes, there are. Are there exceptional ones out there? Yes, there are. Are there bad ones out there? Yes, there are. What you want to do is you want to make sure that you’re talking to a fiduciary advisor that can help steer you towards one that’s going to work for you. Annuities are like anything else. They are a tool to be used. They can play a major role in providing you security going forward. The annuities of today can provide many more kinds of benefits than they were able to do in the 60s, 70s and 80s.  

We have a saying here at Market Advisory Group, and we say it this way. “Don’t fall in love with your investments. Fall in love with what they do for you.” You want to use the right tool for the right job. Annuities can provide a piece of that job to get the best outcome for you. Comment below and tell us how you feel about annuities. Tell us about your experiences. Are they good? Are they bad? Maybe you’re in the right annuity and it’s really providing benefits for you. Maybe you’re in the wrong annuity and it is really giving you a bad taste in your mouth. I’m Danny Goolsby with retirement help. Research. Rethink. Retire.”