Annuities

  • How do annuities fit in your retirement plan? It starts with determining your individual needs.
  • There are generally four different types of annuities — variable, fixed, indexed and income annuities.

Why should I consider investing in an annuity?

An annuity can be an important part of your overall retirement plan.

In evaluating which type of annuity might work best for you, it’s important to first determine your individual needs.

Annuities can help:

  • Generate a guaranteed stream of lifetime income in retirement
  • Increase your savings through tax-deferral
  • Protect what you've saved
  • Or provide for your beneficiaries

In evaluating which type of annuity might work best for you, it’s important to first determine your individual needs.

Guaranteed income

If you’re looking to receive a reliable, consistent income stream in retirement and are concerned about outliving your savings, an annuity may be right for you. Depending on the type of annuity you choose, you can decide to receive payments for the rest of your life, or for a set number of years.

Tax deferral

The tax-deferral of annuities provides the potential for greater growth of your investment since your earnings are not taxed until they are withdrawn. Using annuities for tax-deferral can be a good way to supplement your retirement savings, especially if you’ve already maxed out your 401(k) or IRA options. Also, typically annuities have no contribution limits, so you can invest as much you’d like for retirement.

Asset protection

If you’re looking to protect your savings from market fluctuations, certain types of annuities can provide growth potential with protection from market loss.

Legacy planning

Providing for your family or any beneficiary may also be an important financial goal. Unlike other financial assets, beneficiaries of annuity assets may receive a guaranteed benefit amount, regardless of the performance of the underlying investments.

Which type of annuity is right for me?

It’s important to understand the different types of annuities available.

After determining your overall needs and risk tolerance, it’s important to understand the different types of annuities available. There are generally four different types of annuities to choose from:

  • Variable annuities
  • Fixed annuities
  • Indexed annuities
  • Income annuities

Variable annuities

A variable annuity may be a good choice if you are looking to maximize growth potential and could benefit from tax-deferral of earnings. Variable annuities allow you to choose from a variety of investment options called “subaccounts”. Subaccounts are professionally-managed investment options that invest in stocks, bonds, and/or other investments.

Your account value will fluctuate depending on the performance of the subaccounts you select. That value may be more or less than the original amount you invested. Variable annuities may also offer opportunities to provide guaranteed lifetime income and market protection for an additional cost.

Fixed annuities

A fixed annuity may be appropriate if you are a conservative investor and looking to protect your assets from market volatility. Fixed annuities invest primarily in government securities and high-grade corporate bonds and provide a guaranteed, fixed rate of return typically over a period of one to ten years. The rates are set and guaranteed by the insurance company offering the annuity.

Indexed annuities

If you’re looking for moderate growth with downside protection, an indexed annuity might be a good option for you. An indexed annuity is a type of fixed annuity that offers a return tied to the performance of a given market index (like the S&P 500).

Your funds are not directly invested in the market, therefore protecting your principal investment, in exchange for a capped rate of return. Index annuities may also offer options that provide guaranteed lifetime income for an additional cost.

Income annuities

If you are looking to create a pension-like stream of income in retirement, you may want to consider using a portion of your savings to purchase an income annuity. An income annuity lets you convert part of your retirement funds into a stream of guaranteed income for a certain period of time or for the rest of your life, and even your spouse’s life.

Income annuities can be immediate — starting income as early as 30 days from issue, or they can be deferred — starting income up to 30 years later on a specified date.

Why purchase an annuity through Wells Fargo Advisors?

Wells Fargo Advisors offers a wide range of annuities to help you take advantage of retirement income and savings opportunities. We can help you understand how an annuity works, including its features, benefits, and potential investment risks.

Our Financial Advisors can work with you to determine how an annuity may strengthen your overall retirement savings portfolio, discuss investment opportunities, and help you determine the level of risk that is comfortable for you.

Next steps

  • Understand the different types of annuities available.
  • Compare the four types of annuities and how they can work in your retirement plan.
  • Talk with your Financial Advisor about annuities.

Guarantees are based on the claims-paying ability of the issuing insurance company. Guarantees apply to minimum income from an annuity; they do not guarantee an investment return or the safety of the underlying funds.

Variable annuities are long-term investments suitable for retirement funding and are subject to market fluctuations and investment risk.

Each annuity feature may incur additional cost.

Taxable distributions (and certain deemed distributions) are subject to ordinary income tax, and if made prior to age 59 1/2 also may be subject to a 10% federal income tax penalty. Early surrender charges also may apply.

Fixed annuities may have a higher initial interest rate, which is guaranteed for a limited time period only. At the end of the guarantee period, the contract may renew at a lower rate.

Unlike variable annuities, index annuities (IAs) are typically structured so that they are not securities registered with the SEC. Nor are the sales in IAs regulated by the SEC or FINRA Regulation, Inc.

Investment products and services are offered through Wells Fargo Advisors. Wells Fargo Advisors is the trade name used by two separate registered broker-dealers: Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, non-bank affiliates of Wells Fargo & Company.

Wells Fargo & Company and its affiliates do not provide tax or legal advice. Please consult with your tax and legal advisors to determine how this information may impact your own situation.

Retirement Professionals are registered representatives of Wells Fargo Clearing Services, LLC. Wells Fargo Advisors is the trade name used by two separate registered broker-dealers: Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, non-bank affiliates of Wells Fargo & Company. Discussions with Retirement Professionals may lead to a referral to Wells Fargo Advisors’ affiliates including Wells Fargo Bank, N.A. Wells Fargo Advisors and its associates may receive a financial or other benefit for this referral.

Insurance products are offered through non-bank insurance agency affiliates of Wells Fargo & Company and are underwritten by unaffiliated insurance companies. Not available in all states.

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