A tool that can help supplement your income in retirement

Annuities can play an important role in your retirement plan. Whether you are trying to increase your retirement savings or need a guaranteed income now, there are annuity solutions that you should consider. Safe Harbor Financial Group is an independent financial advisory firm with access to a wide variety of products offered by multiple insurance companies.

When considering an annuity, it is helpful to ask yourself the following questions to determine if this option fits your retirement needs:

Am I concerned about finding a secure retirement plan to help protect my savings?
Am I concerned that there may be a better way to structure my retirement plan?
Am I concerned about outliving my income?

If you answer “yes” to any of these questions, an annuity may work well for you to fill any income gap you may face in retirement.

Types of Annuities

We understand the importance of helping you create a stream of lifetime income for your retirement. You can manage your lifestyle, avoid market volatility, and potentially create a lifetime income that you cannot outlive, simply by having a conversation with us about how you can create a retirement income plan with annuities.

Schedule a Meeting to Learn More About Annuities

If you are looking to create income for your retirement years, contact Safe Harbor to learn more. We offer a complimentary consultation to review your existing retirement plans and can provide an investment strategy that will provide the money you need to live comfortably in your golden years. Contact our office or give us a call at (614) 760-0670 to schedule your initial consultation.

Annuities are designed to be long-term investments and frequently involve charges such as income and death benefit rider fees and surrender charges. Early withdrawals may impact annuity cash values and death benefits. Taxes are payable upon withdrawal of funds. An additional 10% IRS penalty may apply to withdrawals prior to age 59 1/2. Annuities are not guaranteed by FDIC or any other governmental agency and are not deposits or other obligations of or guaranteed or endorsed by any bank or savings association.

Annuity FAQ’s

What is an annuity?

An annuity is a financial product offered by insurance companies designed to provide a steady stream of income, typically during retirement. You invest a lump sum or series of payments, and in return, the insurer pays you regular income, either immediately or at a future date. Safe Harbor Financial Group is a financial broker for annuity products and can help you add annuities to your existing retirement portfolio.

What are the different types of annuities?

There are several types of annuities, including:

Fixed Annuities: Offer guaranteed payments at a fixed interest rate.
Variable Annuities: Payments vary based on the performance of underlying investments.
Indexed Annuities: Payments are tied to the performance of a market index like the S&P 500.
Immediate Annuities: Start paying income almost immediately after purchase.
Deferred Annuities: Payments begin at a future date.

How does an annuity work?

Our clients make an initial investment (either a lump sum or periodic payments) into the annuity. For accumulation-type annuities, the insurer increases the value of your investment over time, typically with tax-deferred growth. Once you are ready to receive income, you can activate an income rider. This will provide a consistent stream of payments for either a specified period or for life, depending on the terms of the rider and the chosen annuity type.

Are annuities taxable?

Yes, annuities are taxable, but the tax treatment depends on whether the annuity is held in a tax-qualified account (like an IRA or Roth IRA) or is a non-qualified annuity:

IRA Annuities:
For annuities within traditional IRAs, any withdrawals or income payments are fully taxable as ordinary income. This includes both the original investment (contributions) and any growth, as contributions were typically made with pre-tax dollars.
Roth IRA Annuities: Annuities in a Roth IRA grow without tax implications, and withdrawals are not taxed if the account has been open for at least five years and certain age or qualifying event requirements are met. This includes both the original contributions and investment gains, making Roth annuities a powerful tax-advantaged tool for retirement income.
Non-Qualified Annuities:
For non-qualified annuities, taxes are deferred until you withdraw funds or start receiving payments. When you withdraw, the portion that represents investment gains is taxed as ordinary income, while the portion representing your original investment (your cost basis) is not taxed. The exclusion ratio is used to determine the taxable and non-taxable portions of each payment.

Can I withdraw money from my annuity early?

Yes, you can withdraw money from your annuity early, but there are potential costs to consider:

IRS Penalty:
If you withdraw funds before age 59½, you may incur a 10% IRS penalty on the taxable portion of the withdrawal. This is in addition to any ordinary income tax owed on the gains. However, certain exceptions (such as disability or specific hardship situations) may exempt you from this penalty.
Surrender Charges:
Many annuities impose surrender charges if you withdraw funds within the early years of the contract, often during the surrender period (typically 5–10 years). These charges gradually decrease and may eventually vanish.
Free Withdrawal Provisions:
Some annuities allow for penalty-free withdrawals up to a certain percentage (e.g., 10% of the account value) annually, even during the surrender period.
Impact on Benefits:
For annuities with income riders or other guarantees, early withdrawals may reduce the future income benefit or account value, potentially affecting the long-term benefits of the annuity.

How safe is my money in an annuity?

Annuities are generally considered a secure financial product because they are backed by the financial strength and claims-paying ability of the issuing insurance company. However, they are not insured by the FDIC, which means they do not have federal protection like bank deposits.

To enhance security, insurance companies are regulated by state insurance departments and typically contribute to state guaranty associations. These associations provide a level of protection up to certain limits if the insurer were to face insolvency, though the coverage varies by state.

At Safe Harbor, we select and manage annuity products that align with your financial goals. Our due diligence ensures we work with highly rated insurance companies to provide you with both stability and peace of mind.

What are the risks of annuities?

The risks of annuities vary depending on the type:

Fixed Annuities:
Fixed annuities provide guaranteed payments, but inflation risk may reduce the purchasing power of those payments over time. This means your fixed income might not keep pace with rising living costs.
Variable Annuities:
Payments and account value depend on the performance of underlying investments, such as mutual funds. This introduces market risk, meaning your returns (and potentially your income) could fluctuate and even decline during market downturns.
Indexed Annuities:
Returns are linked to a market index (e.g., the S&P 500), but caps on returns or participation rates may limit your earning potential, especially in strong market years. Additionally, floor guarantees (protection against losses) can sometimes be offset by lower overall returns.

Other general risks include:

Liquidity Risk:
Annuities often have surrender charges for early withdrawals during the surrender period, which can last several years. Accessing funds early may result in significant penalties.
Fee Risk:
Some annuities, particularly variable and indexed annuities, come with high fees, including management fees, mortality and expense charges, and fees for optional riders. These costs can erode your overall returns.
Issuer Risk:
The safety of your annuity depends on the financial strength of the issuing insurance company. While state guaranty associations provide some protection, they have coverage limits, and there is no federal backing for annuities.

A Safe Harbor advisor can help you navigate the risks of each type of annuity and recommend the option best suited to your retirement goals, risk tolerance, and financial needs.

How do I know which annuity is right for me?

Selecting an annuity depends on factors such as your:

Financial Goals: Are you seeking guaranteed income, growth potential, or a way to leave a legacy?
Age: Younger individuals may prioritize growth, while those nearing or in retirement may focus on income.
Risk Tolerance: Are you comfortable with market fluctuations, or do you prefer stable, predictable returns?
Retirement Needs: Do you want lifetime income, supplemental income for a specific period, or a combination of both?
Liquidity Needs: How soon might you need access to the funds, and are you comfortable with potential surrender charges?

A meeting with a Safe Harbor financial advisor can offer tailored recommendations specific to your financial needs. We’ll analyze your unique situation, explain the pros and cons of each annuity type, and guide you toward the best option for meeting your retirement goals.

Can I use an annuity as part of my retirement plan?

Absolutely. Annuities are a popular tool for supplementing retirement income because they provide guaranteed payments, helping to ensure financial stability throughout retirement. They can complement other savings vehicles, such as pensions, 401(k)s, IRAs, or Roth IRAs, by offering a predictable income stream to cover essential expenses or enhance your quality of life.

At Safe Harbor, we specialize in helping clients incorporate annuities into their broader retirement strategies. Our advisors will assess your unique financial goals, risk tolerance, and income needs to recommend the right annuity product for your retirement portfolio.