Episode 83: What To Know About The 4 Types Of Annuities

Today’s Prep:

Annuities might just be the most controversial topic in the retirement landscape, but why are they such a polarizing set of products? Find out what David thinks about the four different types of annuities and get lots of detail on each one on today’s episode.

(Click the featured times below to jump forward in the episode)

Equipping Points:

Because there are several different types of annuities, some people confuse them and assume they all work the same way. On today’s episode of Cover Your Assets KC we will discuss the four different types of annuities: immediate annuities, fixed annuities, fixed index annuities, and variable annuities.

One form of an immediate annuity is Social Security. If your company has a pension, that is also considered an immediate annuity. With both, you receive money monthly until you die, but once you pass the money goes away (unless it was also meant for a surviving spouse). If you choose to buy an immediate annuity, the same trend continues.

How is a fixed annuity different?

Or how is it the same? You’ll receive a fixed rate of interest for a fixed period of time. David shares an example of how the contract may be set up and how it works differently than a CD.

About 30 percent of the people David works with have an annuity, with the fixed index annuity being the most common type in their portfolio. How does it work? What kind of risk do you have and what kind of protection does this provide? David breaks down the numbers of what earnings can look like. While it likely shouldn’t be where the majority of your retirement funds go, index annuities might be a tool worth using for a piece of protection in your portfolio.

Finally, a variable annuity may be the product that is often considered as something to think twice about. David has never used a variable annuity and instead has helped people get out of them. It probably is not suitable to the vast majority and something to really understand before you add to your portfolio.

Are you using an annuity as a tool for your retirement plan?

Listen to the entire episode or use the timestamps below to hear about a specific type of annuity.

[0:59] – Annuities are a controversial topic.

[3:15] – It’s important to use the right tools.

[5:04] – Type #1: Immediate annuity

[9:22] – Type #2: Fixed annuity

[12:36] – Type #3: Fixed index annuity

[18:25] – Different companies offer different terms.

[19:43] – Type #4: Variable annuity

Today’s Takeaway:


More From David:

The host: David Dickens

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