What Is an Annuity?

An annuity is a contract between you and a Life Insurance Company. This contract states that you’re responsible for making agreed-upon payments in exchange for specific benefits.

How Do Annuities Work?

The annuity transaction begins when an individual pays an insurance company a set amount. The insurer then invests these payments, and at the end of the annuity term, the insurer pays the individual back the initial investment plus its earnings. Depending on the provisions of the contract, the individual might receive a lump-sum payment or an annuity (a set of payments given out within a set period of time).

Are Annuities a Good Investment?

Annuities can be an excellent investment, depending on your unique circumstances. Most people who choose annuities as an investment are interested in saving money for a particular goal or need a stable source of income after retirement. However, it’s important to remember that annuity funds are not accessible during the designated growth period. If you choose to take out your money before the period is up, you’ll be on the hook for additional taxes and penalties. Some annuities offer some access to the money in the form of penalty free withdrawal options every year. Usually around 10% penalty free access (not always available).

Are There Disadvantages?

Annuities have advantages and disadvantages, just like any other financial decision. The main drawback of investing in an annuity is that your funds will be inaccessible for the duration of the growth period. That means you won’t be able to take your money back, even in an emergency, without incurring fines and penalties. In general, you can expect a 10% premature withdrawal penalty if you go ahead with the withdrawal.

What Are My Options for Collecting an Annuity?

As the time to collect your annuity approaches, it’s a good idea to think about your collection options. Z Financial Services can help you choose from the following:

• Fixed Amount: You receive a fixed amount each month.

• Fixed Period: You receive a fixed amount over a chosen period of time.

• Lifetime: You continue to receive payments for as long as you live.

• Life with Period Certain: You receive payments for the rest of your life, but with a minimum period.

• Installment-Refund: You receive payments for the rest of your life, and the remaining annuity goes to a beneficiary after your death.

Is There Any Fees Added When Buying an Annuity?

Annuities aren’t necessarily “free money.” Depending on the type of annuity you choose, you may be subject to certain fees. These include sales commission, surrender penalties, maintenance fees, and investment advisory fees. Z Financial Services can walk you through whether any of these fees applies to your contract.

What Types of Annuities Are Available?

Annuities aren’t one size fits all. In fact, there are several different annuity models to choose from. With the help of Z Financial, you can select the option best suited to your needs. Here’s a brief overview of available annuities we offer:

• Single-Premium: The investment is made in full at one time.

• Flexible-Premium: The investment is made through a series of payments.

• Immediate: You don’t have to wait for payments—they begin right after the annuity is fully funded.

• Deferred: Annuity payments start several years after the contract is drawn up.

• Fixed: Investments are low-risk, and payments are guaranteed for the duration of the agreed-upon period.

• Variable: Investments are tied to the Stock Market and subject to Market Risk (unfortunately, here at Z Financial Services we do not offer Variable annuities for sale as we believe that Market risk is too great when you are nearing retirement and should not invest in such vehicles when you have a short time horizon or when you are already retired)