A clear understanding of annuities
People ask me all the time, "what is an annuity?" This is probably one of the most misunderstood product, or "club" as we like to call it, out their in the financial industry.
An annuity is like a savings account with an insurance company. Much like a CD - if it's fixed. Most people think an annuity is where you give the money to the insurance company and they give you a set amount of money for a certain period of time. That's really not what we're talking about.
Three types of annuities
There are three different types of annuities. There are fixed, indexed, and variable.
Variable means exactly that: it's actually in securities (the market), it has quite a few fees inside, and it goes up and down with the market. When you get into retirement, it's no longer about the return on your money. It's now about the return of your money. So my recommendation would be to avoid this variable asset during retirement.
When in retirement, you should be using a fixed or indexed annuity. For more information about indexing, please watch the video entitled Indexing.
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