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Annuities

The Truth About Annuities

You may have heard that annuities are the answer to everything, or that you should never own one. The truth is in between. Annuities are tools. Used for the right job, they can provide protection and income you can’t outlive. Used for the wrong one, they can tie up money you need. Here’s the straight story.

Book a Retirement Discovery Myths vs. Facts
Watch & Learn

Get the basics on indexed annuities

A short educational video from the Indexed Annuity Leadership Council, an industry group, explaining how fixed indexed annuities work. Watch it, then bring your questions to your conversation with us.

Video by the Indexed Annuity Leadership Council. Video not playing? Watch on YouTube ↗

Myths vs. Facts

What people hear, and what’s actually true.

Myth “All annuities are the same.”
Fact There are very different types, from simple fixed-rate contracts to income annuities. Some have no market exposure at all. Comparing them side by side matters.
Myth “When I die, the insurance company keeps my money.”
Fact Most deferred annuities pay the remaining value to your beneficiaries. Some income options stop at death, so you choose how income and beneficiaries work before you buy.
Myth “Annuities are full of hidden fees.”
Fact Costs vary widely. Many fixed and fixed indexed annuities have no annual fee unless you add an optional rider. Every cost should be explained to you in writing before you sign.
Myth “My money is locked up forever.”
Fact Most contracts let you withdraw part of your money each year without a charge. Taking more during the surrender period can cost you, so an annuity should only hold money you won’t need for that period.
Myth “An annuity is right for everyone.”
Fact It isn’t. If you need the money soon or want full market growth, an annuity may not fit. The right answer starts with your income plan, not a product.
Myth “An indexed annuity puts my money in the stock market.”
Fact It doesn’t. Interest is credited based in part on a market index, up to limits like caps or participation rates, and your money is protected from index losses.
Types of Annuities

Different annuities do different jobs.

Fixed (MYGA)

Like a CD from an insurer

A guaranteed interest rate for a set number of years. Simple and predictable.

  • Rate locked for the term
  • No market exposure
  • Surrender charges if cashed out early

Fixed Indexed

Growth potential, no index losses

Interest is credited based in part on a market index, up to a cap or participation rate. In a down year, you don’t lose value from index losses.

  • Protection from index losses
  • Growth is limited by caps or rates
  • Optional income riders cost extra

Immediate Income (SPIA)

Income starts now

Turn a lump sum into income that starts within a year, for life or a set period.

  • Predictable income right away
  • Can last for life, or two lives
  • Money is generally no longer accessible

Deferred Income

Income that starts later

Buy future income today, starting at a date you choose, often to cover gaps later in retirement.

  • Larger income for the money
  • Helps protect a surviving spouse
  • Less flexible once purchased

Variable annuities are securities and are not offered by DB2 Financial Services.

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Hear From Retirees

Real people share why they chose a fixed indexed annuity.

Watch short retiree stories on the Indexed Annuity Leadership Council’s website. Opens in a new tab.

Watch the stories ↗

The Indexed Annuity Leadership Council is an independent industry organization. DB2 Financial Services is not affiliated with the IALC, and the people featured are not DB2 clients. Individual experiences vary.

Before You Buy Any Annuity

Ten questions to ask.

  1. What job is this annuity supposed to do in my plan?
  2. How long is the surrender period, and what are the charges each year?
  3. How much can I withdraw each year without a charge?
  4. What are all the fees, including any riders?
  5. What is guaranteed, and what is only projected?
  6. For indexed annuities: what are the caps or participation rates, and can they change?
  7. What happens to the money if I die?
  8. How will withdrawals and income be taxed?
  9. How strong is the insurance company’s financial rating?
  10. If I’m replacing an existing annuity, what will I give up?
Free Annuity Guides

Learn more from independent industry resources.

Educational guides from the National Association for Fixed Annuities (NAFA) and the Alliance for Lifetime Income. Each opens as a PDF in a new tab.

▤Annuities in Retirement PlanningHow annuities can fit into a retirement income plan.PDF ↗ ▤Helping Consumers Understand FIAsA plain-language introduction to fixed indexed annuities. Also available in Spanish.PDF ↗ ▤The Anatomy of a Fixed Indexed AnnuityThe parts of an indexed annuity, explained one by one.PDF ↗ ▤Crediting Strategies: CapHow a cap limits, and protects, the interest you earn.PDF ↗ ▤Crediting Strategies: Participation RateHow a participation rate decides your share of index gains.PDF ↗ ▤Annuities Language GlossaryCommon annuity terms in plain English, from the Alliance for Lifetime Income.PDF ↗

Materials are provided by the National Association for Fixed Annuities and the Alliance for Lifetime Income for general education. DB2 Financial Services is not affiliated with either organization.

Common Questions

Questions families ask us.

Is my money safe in an annuity?

Fixed and fixed indexed annuities are not exposed to market losses, and their guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. That’s why the company’s financial rating matters. Each state also has a guaranty association that provides limited protection if an insurer fails.

Can I get my money out if I need it?

Most contracts allow a withdrawal each year without a surrender charge, often around 10% of the value. Larger withdrawals during the surrender period can carry a charge. Many contracts also waive charges for things like nursing home confinement or terminal illness. Check the details for your contract.

How are annuities taxed?

Interest grows tax-deferred, so you pay income tax when you withdraw it, not each year. Withdrawals before age 59½ may also face a 10% IRS penalty. Annuities bought with IRA money follow IRA rules. We don’t give tax advice, so please confirm your situation with a tax professional.

Should I move my 401(k) or IRA into an annuity?

Sometimes, but not always. It depends on your income needs, your other savings, and what you’d give up. We’ll compare your options side by side before you decide anything.

What does an annuity review cost?

Nothing. The review is complimentary and education-first. You’ll leave understanding what you have, whether or not you make any changes.

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Educational Workshop

The Truth About Annuities

Our workshop on annuities, guaranteed income concepts, and common misconceptions. New dates will be announced soon.

Notify Me About Dates
Ready for the Next Step?

Let’s see if an annuity belongs in your plan.

We start with your income plan, not a product. Education first, without pressure.

Book a Retirement Discovery

Or call (803) 761-0136 or email info@db2financial.com

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