What Is An Annuity for Dummies?

mattmims
Feb 11
2 min read

What Is an Annuity?

An annuity is like a special savings plan that people buy from an insurance company. They put money into it, and in return, the insurance company promises to pay them money back over time. This can be for a certain number of years or even for the rest of their life.

There are different types of annuities, but they all have the same basic idea: You pay money now, and later, you get money back in small amounts over time. Some people put in a big lump sum (like $100,000), while others pay little by little over many years.

What Does an Annuity Do?

An annuity helps people by:

Providing a steady income – It’s like getting a paycheck, even if you’re not working anymore.
Protecting against running out of money – Some annuities last for life, meaning you won’t run out of cash, even if you live a long time.
Growing your money – Some annuities let your money grow before you start taking payments.
Helping with taxes – Some annuities delay taxes, meaning you don’t pay until you start getting money from it.

Why Do People Use Annuities?

People use annuities for many reasons:

Retirement – When people stop working, they still need money to live. An annuity can give them a steady income, like a paycheck.
Security – It’s comforting to know you’ll get money no matter what happens.
Tax Benefits – Some annuities let your money grow without paying taxes until later, which can help save money in the long run.
Inheritance – Some people use annuities to pass money to their children or family members after they pass away.

Why Do Rich People Like Annuities?

Rich people already have a lot of money, so why do they use annuities? Here are a few reasons:

They want to protect their wealth – Even though they have a lot of money, they want to make sure it lasts a long time.
They like guaranteed income – Annuities promise regular payments, so they don’t have to worry about losing money in risky investments.
They want to lower their taxes – Some annuities have tax benefits that help rich people save money.
They don’t want to worry about managing money – Instead of handling investments or worrying about the stock market, an annuity gives them a simple way to receive money regularly.

Example of an Annuity

Let’s say Mr. Jones has $500,000 saved for retirement. He buys an annuity that promises to pay him $2,000 every month for the rest of his life. Now, no matter what happens, he knows he will always have money to pay for food, rent, and fun things.

In short, annuities are like a money safety net. They help people, especially rich ones, feel secure about their future money, avoid big losses, and make sure they never run out of cash!

We can always provide a free annuity proposal for you to see how it would work for you.

Email us info@lifestein.com

Or call us at (601)-218-7854