Thinking about and planning for your future can be extremely stressful, especially if you don’t even know where to start. Planning for retirement may seem daunting, and you may want to push it off. However, there are specific strategies for your retirement that will lead to a good income after retirement and reduced stress now.

What is an annuity?

When looking into financial planning, you may come across the different types of annuities. But what exactly is an annuity? An annuity is an investment contract that is made between an individual and an insurance company. The individual begins making periodic payments in the accumulation phase then the insurance company begins payouts in the annuity phase.

Fixed Annuities

One great addition to your portfolio is a fixed annuity. It allows individuals to contribute a lump sum to an insurance company, and in exchange, the insurance company offers a guaranteed fixed interest rate. Fixed annuities are unique because they have tax-deferred status and won’t be impacted by market fluctuations. Investing in a fixed annuity will help you live more comfortably in your retirement. Once you begin receiving payments from your annuity, you have a guaranteed stream of income for your lifetime.

Equity Indexed Annuities

There are multiple types of fixed annuities, but one that has excellent benefits for retirement is an equity indexed annuity. What makes this type of annuity different is the way that the earnings are determined. While equity indexed annuities are still a contract made with an insurance company, the earnings are based on the stock market value. However, there is a capped guaranteed minimum and maximum amount with indexed annuities, which can lead to a loss. Although there are risks with indexed annuities, just like any other investment, there are great benefits and a guaranteed payment amount to be used during retirement.

What it means for your retirement and your stress levels.

Taking the time to consult a financial advisor and learning as much as you can about fixed and equity indexed annuities can significantly benefit your future. Becoming educated on what may scare you is a way to reduce the stress that it brings you. Look into investing in these types of annuities because they have a guaranteed return which will help secure your retirement.