Annuities and Insurance Help Safeguard Against Unforeseen Challenges

Protecting yourself against future difficulties is no simple task, but insurance and annuities are designed to do just that. While insurance provides peace of mind that your business and assets are protected in the event of an emergency, annuities are a way to provide financial stability in your retirement years. The Avenue can help you determine what coverage you need today, and what you will need to live the way you want in the future.

What Types of Insurance Are Available?

There are many different kinds of insurance policies available on the market today. The type that best suits you will depend on the flexibility you need during your living years, and the way you wish for the policy to be paid to your beneficiaries after you are gone. Our advisors can help you choose the option that is best for you and your family.

Whole Life

As the name implies, whole life policies are valid for as long as you live, with no premium changes, and a guaranteed, tax-free payout to the beneficiary when the insured passes. A portion of the premiums are placed in a cash value account and allowed to grow, tax-deferred. The policyholder may borrow from the cash value portion of the policy in times of need, up to established limits.

Universal Life

Unlike whole life policies, universal policy values may be increased or decreased as needed, along with the premiums. This flexibility also applies to the length of the policy, which may be for life or a shorter term. As in a whole life policy, the cash value portion of the policy earns interest, tax-deferred, and may be borrowed without closing the policy.

Variable Life

In a variable life policy, premiums are invested in stocks, bonds, and other investment options, giving them greater opportunity for growth than other life policies. This opportunity also carries the risk that underperforming investment choices may reduce the amount available upon payout of the policy. Growth in the account occurs tax-deferred, and offers access to the funds in a similar fashion to other life policies.

What is an Annuity?

An annuity is like an insurance policy that pays you at the end of the contract. There are two phases to an annuity: the accumulation phase and the income phase. During the accumulation phase, payments into the annuity are used to fund a variety of investments. In the income phase, the annuity pays you in an income stream, a lump sum, or regular withdrawals, depending on the type of annuity you select.

Benefits of an Annuity

Annuities can be tailored to your specific needs and the level of risk you choose. This diversity allows annuities to be switchable if your tolerance changes. Annuities are funded with after-tax dollars, but the growth of the investments is tax-deferred, including capital gains, until you start receiving payments. Depending on the payout structure you select, annuities can provide income for life, and many include a death benefit that will pay the undistributed portion to a beneficiary of your choosing.

Types of Annuities

Tax-Deferred Fixed Annuity:

This type of annuity is sold by insurance companies at a fixed interest rate, offering predictable income and lower risk. Most tax-deferred fixed annuities allow for withdrawals up to 10% of the total value per year but are subject to early withdrawal fees called surrender charges.

Tax-Deferred Variable Annuity:

In these annuities, funds are directed into a variety of investments, both fixed interest and securities, to match your risk profile. As the name suggests, the resultant payout of these annuities varies based on the performance of these investments.

Tax-Deferred Indexed Annuity:

Similar to variable annuities, the value of indexed annuities can fluctuate, but with some added benefits. Indexed annuities track the performance of the index to which they are linked; generally the S&P 500 of Dow Jones. These annuities also come with a guaranteed, typically minimal, interest rate, making them more secure than variable annuities. Some indexed annuities have high surrender charges and other fees which can be costly if you need to access funds early.

Immediate Annuity:

Typically purchased in one lump sum, immediate annuities begin payout soon after purchase to provide a regular source of income. These annuities are good for retirees that are in good physical health but concerned they may outlive their retirement savings. Immediate annuities are only payable to the policyholder, rather than paying a death benefit as many other types of annuities, and are not adjustable or cancellable once purchased. We strongly advise speaking to one of our financial professionals prior to purchasing an immediate annuity to be certain it is the right tool for you.

Important Things to Know About Annuities

Annuities are an investment and all investments carry risk. The performance of the annuity you select will determine how much is paid out when the income phase begins. There are some annuities which provide a guaranteed minimum income regardless of performance, but these are not typical. Annuities are intended to be a retirement vehicle and funds accessed before reaching age 59-½ may be subject to federal tax.

Investors should consider the investment objectives, risks, charges and expenses of variable annuities and variable life insurance and their underlying funds. This and other important information about variable annuities and variable life insurance are contained in the prospectus, which can be obtained from your financial advisor and should be read carefully before investing.

These policies have exclusions and/or limitations. The cost and availability of Long Term Care insurance depend on factors such as age, health, and the type and amount of insurance purchased. As with most financial decisions, there are expenses associated with the purchase of Long Term Care insurance. Guarantees are based on the claims paying ability of the insurance company.