What exactly is an annuity?

An annuity is a financial product issued by an insurance company that provides guaranteed income, either right away or in the future. It can help supplement Social Security and other retirement savings.

Are annuities a safe investment?

Fixed annuities offer guaranteed interest and predictable payments, making them low-risk. Variable and indexed annuities come with higher risk but also the potential for higher returns. Your risk level depends on the type you select.

At what age can I access the money in an annuity?

You can technically access money from an annuity at any age, but withdrawals made before age 59½ may come with a 10% IRS penalty on earnings, along with income taxes. After age 59½, you can take withdrawals without the IRS penalty, and you’ll start receiving income based on your annuity contract — right away with an immediate annuity or later with a deferred annuity. Many annuities also have surrender charges during the early years of the contract, regardless of your age.

Are annuity payments taxable?

Earnings inside an annuity grow tax-deferred, but withdrawals are generally taxed as ordinary income. The exact amount depends on how the annuity was funded.

Do I have to pay fees for an annuity?

Sometimes, in particular for variable and indexed annuities. Fees may include administrative charges, investment management fees, and costs for optional riders. We can help walk you through your options, including the fee structure, before you purchase a plan.

Annuities | Western Wind Insurance & Investments

Annuities are financial products designed to provide a steady income stream, and are often used as part of retirement planning. They are typically offered by insurance companies and can help ensure a predictable income for a set period of time, or even for the rest of your life. Annuities are funded either with a single lump-sum payment or through a series of contributions over time, giving you flexibility in how you build future income.

Annuities can be tailored to suit different needs, whether you're looking for immediate income or want to grow your money for future use. Choosing the right annuity depends on your financial goals, risk tolerance, and income needs. It’s important to work with a trusted financial advisor to select the best option for your future.

Fixed Annuities

These provide regular, guaranteed payments. The interest rate is fixed and does not fluctuate, offering predictability and security.

Variable Annuities

Payments vary based on the performance of selected investment options. While they offer growth potential, they also come with higher risk due to market volatility.

Indexed Annuities

These annuities earn returns based on the performance of a stock market index (e.g., the S&P 500), combining elements of both fixed and variable annuities.

Immediate Annuities

Purchased with a lump sum, these begin paying out almost immediately, typically within a year. They are best suited for retirees who need income right away.

Deferred Annuities

These delay payments until a future date, allowing your investment to grow on a tax-deferred basis.

Before selecting an annuity, take the following into account:

Income Needs: Consider how much supplemental income you'll need during retirement, and for how long.
Payout Options: Choose between fixed period, lifetime income, or joint payouts for you and a spouse.
Fees & Expenses: Variable and indexed annuities may have higher fees. Be sure to understand all associated costs.
Tax Implications: Earnings grow tax-deferred, but withdrawals are taxed as ordinary income. Early withdrawals may incur penalties.
Inflation Protection: Some annuities offer riders or adjustments that help payments keep pace with inflation.
Risk Management: For those concerned about outliving their savings, annuities can provide peace of mind with lifetime income options.

Timing your annuity purchase depends on your retirement strategy and financial situation. Some of the most common enrollment scenarios include:

Nearing Retirement: Many people purchase annuities as they near retirement to create a stable income stream that complements Social Security and other retirement savings.
After a Lump-Sum Windfall: If you receive a large sum, like an inheritance or severance, you might convert part of it into an annuity to ensure future financial security.
When Planning Ahead: Younger individuals may buy deferred annuities early to take advantage of tax-deferred growth for retirement income decades later.

What exactly is an annuity?
An annuity is a financial product issued by an insurance company that provides guaranteed income, either right away or in the future. It can help supplement Social Security and other retirement savings.
Are annuities a safe investment?
Fixed annuities offer guaranteed interest and predictable payments, making them low-risk. Variable and indexed annuities come with higher risk but also the potential for higher returns. Your risk level depends on the type you select.
At what age can I access the money in an annuity?
You can technically access money from an annuity at any age, but withdrawals made before age 59½ may come with a 10% IRS penalty on earnings, along with income taxes. After age 59½, you can take withdrawals without the IRS penalty, and you’ll start receiving income based on your annuity contract — right away with an immediate annuity or later with a deferred annuity. Many annuities also have surrender charges during the early years of the contract, regardless of your age.
Are annuity payments taxable?
Earnings inside an annuity grow tax-deferred, but withdrawals are generally taxed as ordinary income. The exact amount depends on how the annuity was funded.
Do I have to pay fees for an annuity?
Sometimes, in particular for variable and indexed annuities. Fees may include administrative charges, investment management fees, and costs for optional riders. We can help walk you through your options, including the fee structure, before you purchase a plan.

Get in touch

Annuities

Understanding Annuities

Types of Annuities