Annuities · Educational Overview
Understanding Annuities in a Retirement Strategy
Annuities can offer features that may be useful in certain retirement strategies, but they also involve trade-offs, costs, restrictions, product differences, and suitability considerations. Guardian helps clients evaluate whether an annuity may — or may not — fit within a broader financial plan.
Compare the categories
Three different products, often discussed as if they were one
Income, indexed, and variable annuities have different features, costs, limitations, risks, surrender charges, tax considerations, and suitability requirements.
Income annuities
Insurance contracts crediting interest according to the terms of the contract. Typically include surrender periods and liquidity limitations.
Key items to review
- Crediting approach under the contract
- Surrender schedule
- Liquidity and inflation considerations
Indexed annuities
Insurance contracts whose crediting method references an external index in part. Index participation is not direct ownership of an index or a stock-market investment.
Key items to review
- Crediting method, caps, participation rates, spreads
- Rider features and costs
- Surrender schedule
Variable annuities
Insurance contracts with underlying investment options. Values fluctuate with those investments, so market risk applies, including possible loss of value.
Key items to review
- Total costs and rider charges
- Investment options
- Surrender terms and contract features
What a decision should weigh
Annuity decisions involve more than one feature
- Your goals and what role, if any, the contract is meant to play
- Time horizon and when funds may be needed
- Liquidity needs and access to funds during a surrender period
- Risk tolerance and how much market exposure remains appropriate
- Tax considerations, reviewed with your tax professional
- Legacy priorities and beneficiary outcomes
- The insurance company's financial strength and claims-paying ability
- Product expenses, rider costs, and contract details
How we help
Planning first, product second — if at all
We start with the plan: what income the plan needs, when it is needed, what is already in place, and how much flexibility you want to keep.
- Clarify what problem you are actually trying to solve
- Explain how each category of annuity generally works, including limitations
- Review contracts or proposals you have already received
- Evaluate whether any annuity has a role — including the conclusion that none does
- Coordinate any decision with your investments, taxes, and legacy priorities
Annuity Decision Guide
A plain-language guide to income, indexed, and variable annuities and the questions worth asking before you decide.
Get the GuideRequest an Annuity ConversationQuestions people ask
Annuity FAQ
No. Annuities are not appropriate for everyone. Suitability depends on your goals, time horizon, liquidity needs, risk tolerance, tax situation, and overall financial circumstances.
Based in Salem, New Hampshire, Guardian Financial Services works with individuals, couples, families, and business owners throughout southern New Hampshire, Massachusetts, and the broader New England region.
Get a clear explanation before you decide.
You do not need every answer before starting a conversation. A first meeting can help you organize the decisions ahead and determine whether Guardian may be a fit.
Important disclosures
Variable annuities are long-term investment alternatives designed for retirement purposes. Withdrawals of taxable amounts are subject to income tax and, if made prior to age 59 1/2, may be subject to a 10% federal tax penalty. Early withdrawals may be subject to withdrawal charges. Partial withdrawals may also reduce benefits available under the contract as well as the amount available upon a full surrender. An investment in variable annuities involves risk, including possible loss of principal. The contracts, when redeemed, may be worth more or less than the original investment.
A fixed annuity is a long-term, tax-deferred insurance contract designed for retirement. It allows you to create a fixed stream of income through a process called annuitization and also provides a fixed rate of return based on the terms of the contract. Fixed annuities have limitations. If you decide to take your money out early, you may face fees called surrender charges. Plus, if you're not yet 59½, you may also have to pay an additional 10% tax penalty on top of ordinary income taxes. You should also know that a fixed annuity contains guarantees and protections that are subject to the issuing insurance company's ability to pay for them.
Index annuities are contracts issued by an insurance company that offer earning potential linked to participation in the growth, if any, of an index or benchmark.
All deferred annuities are long-term investment alternatives designed for retirement purposes. All annuity contract and rider guarantees, or annuity payout rates, are subject to the claims-paying ability of the issuing insurance company, which is solely responsible for obligations under its contracts. Withdrawals will generally be subject to a surrender penalty if redeemed during the surrender charge period and if they are in excess of any free withdrawal provisions. Since annuities grow tax-deferred, any withdrawals made prior to age 59 1/2 may be subject to a 10% federal tax penalty in addition to any gains being taxed as ordinary income.
The S&P 500 index is an unmanaged index of 500 widely held stocks. Investors cannot invest directly in an index.