Annuities were designed to be a reliable means of securing steady cash flow for an individual during their retirement years and to alleviate fears of the longevity risk of outliving one’s assets. Annuities can also be created to turn a substantial lump sum into steady cash flow, such as for winners of large cash settlements from a lawsuit or from lottery winning. An index annuity gives the contract owner the benefit of having a private pension plan. An annuity is a popular option for retirees or soon to retire individuals, because in most cases at retirement many individuals need to make their career savings last the remainder of their life. In addition to making savings last, index annuities, are unique hybrid accounts that provide, safety when the stock market is negative that given year, however, there are strategies that promote significant account growth in a positive stock market. Similar to pension plans an annuity feature is referred to as an income rider; if an income rider is placed on a retiree annuity that income rider’s purpose, is to provide income for life.
A scenario where an Index Annuities contract, can be a great fit into one’s portfolio is the following.