As you plan for your future, you may be considering annuities as a way to ensure a steady stream of income in retirement. There are two main types of annuities to consider: multi-year annuities (MYAs) and variable annuities (VAs). Both of these options can provide a level of security for your retirement, but there are important differences between the two that you should be aware of before making a decision.
What are Multi-Year Annuities (MYAs)?
Multi-year annuities are fixed annuities that provide a guaranteed interest rate for a set period of time, usually between 3-10 years. This means that your money is protected from market fluctuations during this time, and you can count on a steady income stream that won’t be affected by changes in interest rates or market conditions. After the set term, you can either withdraw your funds or roll them over into another MYA.
MYAs are a good choice if you are looking for a guaranteed rate of return and want to protect your principal. They are also a good option if you want to avoid the risk and volatility of the stock market, as MYAs offer a fixed rate of return.
What are Variable Annuities (VAs)?
Variable annuities, on the other hand, are a type of annuity that allows you to invest your money in a range of different investment options, such as stocks, bonds, and mutual funds. The performance of these investments will determine the number of your future payouts. Because VAs are invested in the market, there is a level of risk involved, and the returns are not guaranteed.
However, VAs also offer the potential for higher returns than MYAs, as the investments, they are tied to can grow over time. Additionally, VAs often come with features such as death benefits and living benefits that can provide added protection and income in retirement.
Which Option is Right for You?
Deciding which type of annuity is right for you depends on your individual financial situation and goals. If you are risk-averse and want a guaranteed rate of return, then a MYA may be the better option for you. On the other hand, if you are comfortable with a higher level of risk and want the potential for higher returns, then a VA may be the better option.
It’s important to consider the fees associated with both types of annuities as well. MYAs typically have lower fees than VAs, which can eat into your returns over time. Additionally, VAs often come with surrender charges, which can be costly if you need to withdraw your funds before the end of the surrender period.
When considering annuities, it’s also important to remember that they should not make up your entire retirement portfolio. They are just one piece of the puzzle and should be used in conjunction with other investments such as stocks, bonds, and mutual funds to ensure a diversified and well-rounded portfolio.
In summary, MYAs and VAs both have their advantages and disadvantages. It’s important to carefully consider your individual financial situation and goals before making a decision. Working with a financial advisor can also help you make an informed decision that is right for you.
This article was published by a third party and is intended for general informational purposes only and does not necessarily represent the views of Alliance America. Some information may not apply to your situation. It does not, nor is it intended, to constitute legal or financial advice. You should consult with a financial professional regarding any specific questions about your financial situation. Alliance America is a life and income planning company. It is not a lawyer or law firm and is not engaged in the practice of law. For more information about multi year guaranteed annuities and other income planning matters, visit our website at www.allianceam.com.
