Annuities are financial products designed to guarantee retirement income streams in exchange for either an upfront lump-sum payment or series of installments over time. American Equity provides several such annuities. But are these annuities really worth purchasing? To answer that question we must assess each product’s features, advantages and drawbacks and consider their suitability for our individual goals.
What Are American Equity Annuities?
American Equity is an annuity and life insurance provider known for providing retirement products. Their offerings span fixed annuities to fixed index annuities to immediate annuities – each catering to unique financial needs and risk profiles.
Advantages of American Equity Annuities (AEAs)
- Guaranteed Income: One key advantage of American Equity annuities, like those offered through this provider, is their promise of guaranteed income to retirees who may worry about outliving their savings. This feature can provide peace of mind that their savings won’t run dry too early on in retirement.
- Protection From Market Volatility: Fixed and fixed indexed annuities can offer investors peace of mind during market declines by protecting both principal and interest earned – providing security to conservative investors.
- Tax Deferral: American Equity products allow your interest to accumulate tax-deferred, meaning it won’t incur taxes until income starts coming in from it.
- Customizable Riders: American Equity offers several riders or additional features which can be attached to an annuity contract to provide enhanced death benefits, long-term care benefits or additional income benefits. These riders include increased death benefits, long-term care benefits or extra income benefits.
Drawbacks of American Equity Annuities (AEAs)
- Complexity: Annuities can be complicated products; therefore it’s essential that investors fully comprehend all terms, fees and penalties associated with any contract before entering one.
- Surrender Charges: If you access funds early, early surrender charges could apply and could become significant during its first years.
- Caps and Participation Rates: Index annuities may impose caps or participation rates which limit how much of their interest you can claim when market performance goes above expectation; this could prevent you from realizing all the upside from an improved market performance.
- An Annuity Isn’t FDIC Insured: Unlike bank products, annuities do not come backed by FDIC insurance coverage, making them dependent upon the financial strength of their issuing insurance company and thus essential in considering its health before purchasing one.
But Are They Worth It?
American Equity Annuities’ worth depends heavily upon individual financial goals, risk tolerance levels and retirement planning needs; thus their worth depends upon annuitant profiles which best suit these aspects of planning needs.
- Conservative Investors: For investors who prioritize safety over aggressive growth, fixed or indexed annuities might provide the ideal investment vehicle – providing guaranteed income while shielding principal from market instability.
- Retirees Seeking Reliable Income Streams: Retirees who require steady streams of income might find immediate or deferred annuities with income riders beneficial as retirement approaches.
- Are You Seeking Liquidity: If you anticipate needing access to funds quickly, be mindful of surrender periods and penalties associated with investing. There may be alternative vehicles which might better meet your needs.
Conclusion
Annuities offered by American Equity can play an essential part of any well-diversified retirement portfolio. When making decisions pertaining to annuities and other retirement products, always consult a financial advisor so you make well informed choices.
