Hoots, Baker & Wiley, P.C.

certified public accountants

P.O. Box 7356, Salem, Oregon 97303

Phone: 503-585-1782

Office: 503-585-1818


January 2019

When Fixed Annuities Make Sense

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If you’re risk-averse, are concerned that investments in stock or bond mutual funds may lose principal or you’re looking for some guarantees in retirement, a fixed annuity* may be one answer.


WHEN YOU WANT CERTAINTY
If your only guaranteed income in retirement is Social Security and your employee retirement plan doesn’t offer an annuitization option, a fixed annuity can provide one avenue of dependable income in retirement. While fixed annuities are backed by the financial strength of the insurance companies issuing them, the guaranty fund of your state guarantees them up to certain limits if the insurer can’t meet its obligations.


A fixed annuity grows tax-deferred, so you are not taxed on gains until you begin withdrawals, and it offers payment options called “period certain,” which is the number of years specified in your contract. You may also choose a lifetime benefit option at an extra cost, which will last as long as you do.


WHEN YOU ARE UNINSURABLE
You might also buy a fixed annuity to provide a financial legacy to loved ones or as a way to pay for your potential long term care costs, in the event health makes insurance unaffordable or unavailable. While annuities offer certain advantages, they can be costly (see the disclaimer below), so make sure to compare annuity contracts from financially strong insurance companies with the help of a financial professional.


* An annuity may impose charges, including but not limited to surrender charges, mortality and expense risk charges, administrative fees and underlying fund expenses. You will have to pay federal income tax on any earnings you withdraw from the annuity. Payments and guarantees are subject to the claims-paying ability of the issuing insurance company.


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