Understanding Annuities | A Safe and Strategic Retirement Tool
What Is an Annuity?
An annuity is a financial product sold by insurance companies that helps you accumulate and protect retirement savings. It’s designed to convert your savings into predictable income—either for a set number of years or for the rest of your life.
Unlike traditional retirement accounts or investments, annuities are known for three key benefits:
Guaranteed lifetime income
Tax-deferred growth
Protection from market losses
They can be especially valuable for people who are planning for long-term retirement income, want safety and stability, or are concerned about outliving their savings.
How Do Annuities Work?
You purchase an annuity with either a single premium (one-time lump sum) or a series of payments. The money you contribute is then invested in either a fixed account or an indexed account, depending on the annuity type.
At a future date, you can choose to convert your annuity into income through a process called annuitization—giving you monthly, quarterly, or annual payouts.
With fixed annuities, your money grows at a guaranteed interest rate.
With indexed annuities, like Americo’s Elite 5, your interest is tied to the performance of well-known stock market indexes
such as the S&P 500 or NASDAQ—but your money is never actually invested in the market.
This means you can earn more in good years without losing money in down years.
The Elite 5 Indexed Annuity: Key Features
Legacy Drive offers access to annuity products from some of the top providers in the country—including Americo’s Elite 5, a single-premium, indexed annuity that offers strong guarantees and flexible options.
Highlights include:
Tax-deferred growth: Your earnings grow without being taxed until withdrawal.
No market downside: You won’t lose value if the market drops.
Locked-in gains: Once interest is credited, it cannot be lost due to future market performance.
Flexible indexing methods: Choose from 1-year or 5-year options based on your strategy.
Multiple index sectors: Including technology, healthcare, biotech, real estate, and the S&P 500.
10% penalty-free withdrawals annually after the first year.
Guaranteed lifetime income options.
Full-value death benefit for your beneficiaries.
Nursing home and hospital waiver: Full access to your funds if confined to a care facility.
These features make the Elite 5 particularly attractive for people nearing retirement, conservative investors, and those looking for a balanced, long-term growth tool.
Who Should Consider an Annuity?
Annuities may be a good fit for you if:
You're within 10–15 years of retirement and want guaranteed income.
You're concerned about market volatility and want to protect your principal.
You’ve maxed out other retirement accounts (like IRAs or 401(k)s) and want to continue growing your savings tax-deferred.
You're looking for steady income you can't outlive.
You want a solution that blends growth potential with downside protection.
What About Taxes?
One of the most powerful benefits of an annuity is tax deferral. Unlike a CD or savings account, you don’t pay taxes on your gains until you start withdrawing money—giving your account more time to grow.
This means:
Your initial deposit
Your interest earnings
And your would-be taxes
…are all working together for compounding growth.
Withdrawals are taxed as ordinary income, and if you take money out before age 59½, you may face a 10% early withdrawal penalty—just like with most retirement accounts.
How Do Indexed Annuities Earn Interest?
Indexed annuities like the Elite 5 grow based on the performance of a market index. But unlike investing directly in stocks, you’re not at risk of losing value when the market dips.
There are two primary indexing methods:
Point-to-Point Indexing
Measures index growth from the start to the end of a set period.
If the index increases, you receive a percentage of the gain (called the Participation Rate).
If the index declines, you earn 0%—but you don’t lose money.
Final Average Indexing
Uses an average of the index’s value over a set time to calculate growth.
Offers smoother returns and protection from short-term dips.
With either method, your gains are locked in and become part of your principal moving forward.
Accessing Your Money
While annuities are designed for long-term use, the Elite 5 includes flexibility for life’s unexpected turns:
Up to 10% of your value can be withdrawn each year after the first year—penalty-free.
Nursing home and hospital stay waivers allow you to access the full value without penalties in qualifying situations.
After 5 years, you can renew or exit your contract with no surrender charges.
What Happens If I Die?
The Elite 5 includes a death benefit that passes the full value of your annuity—without surrender charges—to your beneficiaries. This ensures your money is protected and passed on without delay.
Bottom Line: Why Choose an Annuity?
Annuities are a powerful addition to a well-rounded retirement strategy—especially if you want:
Security
Growth
Lifetime income
Protection against market risk
When paired with other tools like Indexed Universal Life (IUL) or traditional life insurance, annuities can help secure your future, protect your loved ones, and give you peace of mind.
Next Steps
Want to know if an annuity is the right fit for you? Legacy Drive offers free, no-pressure consultations to walk you through your options.
Let’s talk about your goals—and see if an annuity is a smart move for your financial future.
