Are annuities are a good thing to have in your investment portfolio? It depends. You'll need to make decisions based on your own personal and financial goals.

Start by asking yourself a few important questions:

• How much risk/return do I need from my investments?
• How much income do I need during retirement?
• Do I need to live on this money or do I plan to leave it to my heirs?
• Do I have money for emergencies?
• Are my investments diversified enough?

What is an Annuity?
An annuity is an insurance product. It is a contract between an individual and an insurance company. It is designed to pay an income stream to the contract holder, usually after retirement.

All annuities are tax deferred, meaning that the earnings from investments in these accounts grow tax-deferred until withdrawal.

Annuities avoid probate if the beneficiary designation is set up properly. When funds are withdrawn they are subject to ordinary income taxes.


Types of Annuities

• Fixed Annuity – Offers a fixed interest rate. Also may offer bonus rates and is required to offer a minimum guaranteed rate of return.
  
• Variable Annuity – The investment return is a result of fund performance in the stock market. There is potential for a greater return but also a risk of losing principal and interest.
  
• Fixed Indexed Annuity - An indexed annuity is a fixed annuity, either immediate or deferred, that earns interest or provides benefits that are linked to a stock market index. However, the funds in the contract do not actively participate in a stock or index. There is no risk of losing principal or interest previously credited.

More Information
If you are interested in more information about annuities you can go to the National Association of Insurance Commissioners (NAIC) website at http://www.insurance.insureuonline.org/ to order a consumer guide about annuities.


James J. Speir, owner of Speir Financial Services, LLC, helps many clients determine their insurance needs. He is also founder and President of the Senior & Caregiver Resource Network. James can be reached at (888) 458-0667 or This e-mail address is being protected from spambots. You need JavaScript enabled to view it . This information is not intended to provide investment advice.