What an annuity is and why people use one
An annuity is an insurance contract built for retirement. You give an insurance company money, either all at once or over time. In return, the insurer agrees to credit interest or growth to your account and, when you’re ready, to pay you income. That income can last a set number of years or your entire lifetime.
People usually turn to annuities for one of three reasons. They want to protect savings from market drops. They want growth that’s tax-deferred until they take money out. Or they want a steady paycheck in retirement that won’t run out no matter how long they live. Many annuities can do more than one of these jobs.
Kris focuses on fixed and fixed-indexed annuities. These are insurance products, not securities, and Kris isn’t an investment adviser. Her role is to explain how these insurance products work and whether one might fit alongside your other retirement savings, such as Social Security, a pension, a 401(k) or bank accounts.
Annuities come in two broad timing styles. A deferred annuity grows for a period of years before you take income, which suits people still working or newly retired. An immediate annuity starts paying income soon after you buy it, turning a lump sum into a steady check. Kris will explain both so you can see which timing matches your plans.
Kris Kryder is a licensed insurance agent, not an investment adviser, tax professional or attorney. Annuity guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Please talk with your tax or financial professional about how an annuity fits your overall situation.
Fixed vs. fixed-indexed annuities
A fixed annuity works a lot like a certificate of deposit from an insurance company. It credits a declared interest rate for a set period, and your principal is protected from market losses. One common version, the multi-year guaranteed annuity, locks in a rate for the length of the contract. It’s simple and predictable.
A fixed-indexed annuity also protects your principal from market losses, but its growth is linked to a market index, such as the S&P 500. When the index rises, your account is credited with a portion of that gain, limited by caps, participation rates or spreads. When the index falls, you’re credited zero, not a loss. You aren’t directly invested in the market.
Neither type is right for every dollar you have. Both are long-term contracts with surrender periods, and both are generally suited to money you don’t expect to need for several years. Keeping an emergency fund outside the annuity is always a good idea. Many people place only part of their savings in an annuity and keep the rest in bank accounts or other holdings, so they have both protection and easy access to cash for surprises like a new roof or a medical bill.
| Feature | Fixed annuity | Fixed-indexed annuity |
|---|---|---|
| How growth is credited | Declared interest rate | Linked to a market index, subject to caps, participation rates or spreads |
| Principal protection from market losses | Yes | Yes |
| Predictability | High — you know the rate | Moderate — credits vary with the index |
| Tax treatment | Tax-deferred growth until withdrawn | Tax-deferred growth until withdrawn |
| Surrender period | Yes | Yes |
| Optional income rider | Sometimes available | Commonly available |
Income riders: turning savings into a paycheck
One of the main reasons people consider an annuity is income they can’t outlive. Many fixed-indexed annuities offer an optional guaranteed lifetime income rider, sometimes called a GLWB. For an added cost, it guarantees you can withdraw a set amount each year for life, even if your account value runs down to zero.
The rider usually tracks a separate income value used only to calculate your payments. This value is not cash you can walk away with, which is a point that often confuses people. The withdrawal percentage generally depends on your age when income starts, and many riders offer a joint option that covers a spouse as well.
Income riders can help fill the gap between Social Security, any pension and your monthly expenses. But they add cost and complexity, so they make sense only if you truly plan to use the income. Kris will show you how a rider works using the carrier’s own illustration, not a sales summary.
Surrender periods, fees and what to watch for
Annuities are designed as long-term contracts. Most have a surrender period, a set number of years during which taking out more than the allowed yearly withdrawal amount triggers a surrender charge. Many contracts allow a limited withdrawal each year without a charge, but larger withdrawals early on can cost you part of your money.
Taxes matter too. Earnings grow tax-deferred, but withdrawals of earnings are taxed as ordinary income, and withdrawals before age 59½ may also face a federal tax penalty. Annuities funded with IRA or other qualified money follow those account rules, including required minimum distributions. Kris isn’t a tax adviser, so check these details with your tax professional.
Finally, understand that guarantees depend on the insurance company. That’s why Kris looks at the issuing carriers she represents and explains who stands behind each contract. Annuities also come with a short review period after delivery, set by state law, during which you can read the contract and cancel. Ask questions until you’re comfortable, and never feel rushed.
- How long is the surrender period, and what are the charges each year?
- How much can I withdraw each year without a charge?
- For an indexed annuity, what are the caps or participation rates, and can they change?
- What does the income rider cost, and when can income start?
- What happens to the money if I die before or after income begins?
How Kris helps
Kris starts by listening. She’ll ask about your retirement income sources, your savings, when you might need money, and how you feel about risk. If an annuity isn’t a good fit, she’ll say so. Not everyone needs one, and money you may need soon generally doesn’t belong in one.
If an annuity does fit, she compares fixed and fixed-indexed options from carriers she represents, walks you through the contract terms and illustrations, and helps you complete the paperwork. She’ll also coordinate with your tax or financial professional if you’d like them involved.
Afterward, Kris reviews your annual statements with you and helps when it’s time to turn on income. Because she also helps with Medicare, she can keep your whole retirement picture in view. Learn more on our life insurance and retirement page or contact Kris to talk it through.
Retirement planning help in northwest Ohio
Retirees across Perrysburg, Toledo, Maumee and the rest of northwest Ohio often face the same questions: how to make savings last, how to cover health costs, and how to protect a spouse. Kris brings those threads together. She can help with Medicare coverage, long-term care planning and annuities in one conversation.
Meetings are available in person at her Perrysburg office, or by phone and video. Consultations are no-cost and no-obligation. If you already own an annuity and aren’t sure what it does, bring your most recent statement and Kris will help you understand it.
Kris has served clients across the region since 2017 and is licensed in Ohio, Michigan, Indiana and Florida. That can be helpful if you’re planning to retire somewhere warmer or already spend part of the year away. Your annuity stays with the issuing insurer wherever you live, and Kris can keep helping with statements, beneficiary updates and income decisions.
Who fixed & fixed-indexed annuities may be right for
- Pre-retirees and retirees who want to protect part of their savings from market losses
- People who want guaranteed income to supplement Social Security or a pension
- Savers looking for tax-deferred growth on money they won’t need for several years
- Couples who want income that continues for a surviving spouse
- Owners of an existing annuity who want it explained in plain English
Life insurance and annuity products are issued by the insurance company, and guarantees are backed by the financial strength and claims-paying ability of the issuer. Kris Kryder is a licensed insurance agent, not a tax, legal or investment adviser.