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An indexed annuity is a type of fixed annuity that earns interest based on the performance of a stock market index, such as the S&P 500. These annuities typically have a cap, which limits the amount of interest that can be earned in a given year, and a participation rate, which determines the percentage of the index’s performance that the annuity will track. One of the main benefits of indexed annuities is that they offer the potential for higher returns than traditional fixed annuities while also providing a measure of downside protection. However, they also tend to have higher fees and charges than other types of annuities.
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Benefits of Annuity
- Potential for higher returns than traditional fixed annuities
- Provide a measure of downside protection
- Offer a guaranteed minimum interest rate
- Tax-deferred growth
- Some indexed annuities offer riders such as long-term care or return of premium death benefits
- Can be used as a way to generate retirement income
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Annuities for retirement
Get a guaranteed stream of income to help pay expenses after you stop working.
What is an annuity?
You’re saving to build a nest egg for retirement. But once you stop working, how will you get a regular income to live on? Annuities are a retirement vehicle that can help provide a steady, guaranteed stream of income in retirement. And, you can contribute to an annuity as part of your retirement strategy alongside any contributions you make to a 401k or an IRA.
What type of annuity is right for you?
There are several types of annuities, and many provide tax-deferred growth. How do you want your money to be invested? When do you need to start receiving income? Different annuities are designed to meet different needs.
Immediate annuities
Most annuities are "deferred" – you invest for a number of years and then take income later. Immediate annuities start paying within a year: You make a single, lump-sum payment, then we distribute income based on the schedule you choose (i.e., for a select period, or life).
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Fixed deferred annuities
A fixed annuity is a long-term retirement investment for people who want predictability. You’ll receive a guaranteed rate of return on the premium you contribute. And, when you’re ready to retire, you can receive guaranteed income payments.
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Fixed index annuities
This annuity can provide both premium protection and growth potential, allowing you to benefit when the market performs well and protection when it does not. They provide a minimum guaranteed interest rate combined with potential growth tied to a specific index.
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Variable annuities
If you want to invest your money over the long term and take advantage of potential growth of the financial market, look at variable annuities*. They also provide the opportunity for you to earn tax-deferred savings until you're ready to receive guaranteed income payments from the annuity.
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Annuity benefits comparison chart
Immediate
Fixed
Fixed indexed
Variable
Can provide guaranteed income for life
Immediate start to income
Tax-deferred principal growth
Inflation/cost-of-living adjustments
Potential for market-like returns on your principal amount that is tied to market or index performance
Protection against market losses
Potential legacy for heirs
Note: The benefits listed are generally available for the type of annuity noted, but may not be included in a specific annuity holder’s contract: each annuity contract is unique and tailored to the owner’s needs.
Why consider an annuity
For most people, annuities are an additional way to plan for retirement, along with an IRA, 401(k), or pension. They can help simplify the task of turning a large retirement savings nest egg into regular income. And, by providing a lifetime guaranteed income stream, they can help ensure you don't outlive your money.
Top 5 things to know about annuities
How an annuity works
An annuity is a contract with an insurance company that can guarantee income for a set period of time (e.g., 10 years) or indefinitely (i.e., the rest of your life). Immediate annuity contracts begin paying within a year of purchase; deferred annuities let you build savings while you’re working and convert it to a stream of income later on.
Learn about immediate and deferred income annuities
Where it fits in your plan
An annuity can be an important part of your financial plan, along with life insurance and other investments. No matter where you are in your retirement strategy — or how much you need to save for other life goals — we can provide guidance on saving and investing to help you retire the way you want.
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Who is an annuity for?
Whether you’re about to retire or still years away, you should consider getting an annuity if you want a steady, guaranteed monthly income to live on in retirement. An annuity contract is one of the only investments available that can guarantee you’ll have income for life.
Annuities can provide three significant benefits for your retirement
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Frequently asked questions about annuities
Immediate annuities: Also called immediate income annuities, these provide a guaranteed stream of income right away in return for a single lump sum payment. The amount of income is calculated according to set annuity factors.
Fixed annuities: This could refer to a deferred income annuity or a deferred fixed annuity that provides income at a future date in return for one large sum or periodic payments that grow over time based on a fixed interest rate.
Variable annuities: These are annuities that grow over time based on market investments which can fluctuate and provide income at a future date. However, a variable annuity provides fewer guarantees than other annuity contracts and may decrease in value.
Fixed indexed annuities: These are designed to provide market growth potential, like a variable annuity, and premium protection. A fixed indexed annuity gives you the potential for growth tied to a specific market index, such as the S&P 500, but is typically capped; in addition, a minimum guaranteed interest rate protects you from losses.
*Learn more about Guardian Variable Annuities, including important information that you can read or download anytime
Prospectuses
Prices and performances of our annuities
Guardian Variable Products Trust
View important VPT documents such as prospectuses, reports, and the SAI.
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This material is intended for general public use. By providing this content, The Guardian Life Insurance Company of America, The Guardian Insurance & Annuity Company, Inc. and their affiliates and subsidiaries are not undertaking to provide advice or recommendations for any specific individual or situation, or to otherwise act in a fiduciary capacity. Please contact a financial representative for guidance and information that is specific to your individual situation.
This material is for information use only. It should not be relied on as the basis to purchase a variable, fixed or immediate annuity or to implement a retirement strategy.
The information provided herein is not written or intended as investment, tax or legal advice and may not be relied on for purposes of avoiding any federal tax penalties. This information supports the promotion and marketing of annuities.
There are no additional tax benefits if you purchase an annuity to fund an IRA or qualified retirement plan. Therefore, an annuity should only be purchased in an IRA or qualified plan if you value some of the other features of the annuity and are willing to incur any additional costs associated with the annuity to receive such benefits.
Current tax law is subject to interpretation and legislative change. Tax results and the appropriateness of any product for any specific taxpayer may vary depending on the particular set of facts and circumstances. Entities or persons distributing this information are not authorized to give tax or legal advice. Individuals are encouraged to seek specific advice from their personal tax or legal counsel.
Variable annuities are long term investment vehicles designed to help investors save for retirement and involve certain contract limitations, fees, expenses and risks, including possible loss of the principal amount invested. The investment return and principal value may fluctuate so that the investment, when redeemed, may be worth more or less than original cost. As with many investments, there are fees, expenses and risks associated with these contracts. All guarantees including the death benefit payments are dependent upon the claims paying ability of the issuing company and do not apply to the investment performance of the underlying funds in the variable annuity. Assets in the underlying funds are subject to market risks and may fluctuate in value.
Withdrawals of taxable amounts from a variable or fixed deferred annuity will be subject to ordinary income tax and possible mandatory federal income tax withholding. If withdrawals are taken prior to age 59½, a 10% IRS penalty may also apply. Withdrawals may also be subject to a contingent deferred sales charge.
Variable annuities and their underlying variable investment options are sold by prospectus only. Investors should consider the investment objectives, risks, charges and expenses carefully before investing. This and other information are contained in the prospectus or summary prospectus, if available, which may be obtained from your investment professional. Please read it before you invest or send money.
Fixed and variable annuities are issued by The Guardian Insurance & Annuity Company, Inc. (GIAC). All guarantees are backed exclusively by the strength and claims paying ability of GIAC. Variable annuities are issued by GIAC, a Delaware corporation, and distributed by Park Avenue Securities LLC (PAS). Both GIAC and PAS are wholly owned subsidiaries of The Guardian Life Insurance Company of America, 10 Hudson Yards, New York, NY 10001.
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