Annuities

Annuities are a financial product designed to provide a steady income stream for life. Their primary purpose is to safeguard against the risk of outliving your savings. At AGL financial we offer guidance on a full range of annuity types including:

Types of annuities we can help you evaluate

  • Fixed Annuities: Offer predictable, stable returns with a guaranteed interest rate.
  • Indexed Annuities: Provide growth potential based on the performance of a market index, while still protecting principal from market loss.
  • Variable Annuities: Allow you to invest in the stock market, offering higher growth potential albeit with greater risk.
  • Immediate & Deferred Annuities: Designed to begin payouts either right away or at a future date, depending on your income needs.

Weighing the trade-offs

Annuities are a valuable income tool in a broader retirement strategy, especially for those seeking predictability and peace of mind. However, they can also be complex, and not every annuity is the right fit for every person’s situation. 

We help clients understand the trade-offs, tax implications, fees, and income guarantee associated with each option. Whether you’re evaluating an existing annuity or considering adding one to your financial plan, we provide independent, objective advice to ensure it aligns with your long-term goals.

Annuity questions to ask before you buy

Are annuity guarantees really guaranteed?

Annuity guarantees are backed by the insurance company that issues the contract, so they depend on that company’s financial strength and claims-paying ability. They are not insured by the FDIC or any government agency. Guarantees also apply only under the terms of the contract, so it is important to understand the conditions, limits and any rider costs before you buy.

What fees and surrender charges do annuities have?

Costs vary by product. Many annuities charge a surrender fee if you withdraw more than a set amount during the first several years. Variable annuities typically carry mortality and expense charges, administrative fees and the costs of the underlying investment options, and optional riders usually add an annual charge. The investment options in a variable annuity are subject to market risk and can lose value, including principal. Variable annuities are sold by prospectus, which describes these costs and risks in detail and should be read carefully before investing.

How are annuities taxed?

Earnings in a deferred annuity generally grow tax-deferred. When withdrawn, earnings are taxed as ordinary income rather than at capital gains rates, and withdrawals before age 59½ may also face a 10% federal tax penalty. An annuity held inside an IRA does not add any extra tax deferral. Cambridge does not provide tax advice, so please confirm your situation with a tax professional.

Should I keep or replace an annuity I already own?

It depends on the contract. Replacing an annuity can mean new surrender charges, a new surrender period and the loss of benefits you already have, so an exchange is worth considering only when the new contract is clearly better suited to you. We can review your current contract, its costs and its benefits before you make any change.

These answers are general education, not individual tax, legal or investment advice. Your situation may differ, so please talk with us or a qualified professional before acting.

Fixed insurance offered through various independent insurance companies. Cambridge does not provide tax or legal advice.

Wondering whether an annuity fits your plan?

Annuities are one tool among several. They usually come up during retirement planning, alongside wealth management and IRA legacy planning. If you want a straight read on whether one belongs in your plan, ask us.