A Guide to Annuities.


seniors considering an annuity plan.

Are you planning for retirement? An annuity is an option that may allow you to benefit from guaranteed monthly payments during retirement. Common types of retirement annuity plans include 401Ks, IRAs, and TSAs, although others certainly exist as well. In today’s blog post, we are going to discuss what an annuity is, how it works, and how it may be able to help you save for retirement.


Continue reading to learn more, and if you are interested in speaking to a helpful, knowledgeable agent about annuities, it’s time to schedule a consultation with Medi-Solutions Insurance Agency, LLC. Contact us today to learn more.

What Is an Annuity?

An annuity is commonly used as a retirement vehicle for those who are looking for a solution that can provide them with a guaranteed monthly source of income for life. While this is not the only possible use of an annuity, for the purposes of this article, we will be focusing on utilizing an annuity for retirement purposes.


Annuities are unique in that the funds grow on a tax-deferred basis. Depending on the type of annuity you purchase, you may be required to pay taxes as the money is paid out. However, if you purchased the annuity as a part of a qualified retirement program such as an IRA or 401K, this may differ depending on the terms of your policy and whether you have met certain criteria. 


There are several different types of annuities, so it’s essential that you speak to someone who is experienced in the world of annuities and retirement investments like the helpful insurance agents at Medi-Solutions Insurance Agency, LLC. Our team is standing by to help explain your options for annuities so that you can make an informed decision on setting up your retirement policy.

The Types of Annuities

chart of how an annuity life insurance plan works.

The Phases of Annuities

Annuities have two phases: the accumulation phase and the distribution phase.

The Accumulation Phase

The accumulation phase is essentially what it sounds like; it is the time period where the funds in your annuity grow on a tax deferred basis. Your annuity will fall under one of two payment modes:


  • Single Premium – This is an annuity purchased with a one-time payment.
  • Flexible Premium – This is an annuity purchased with recurring periodic payments.


Annuities can also vary by the timing of when your annuity income begins. Each annuity will fall into one of the following two categories:


  • Deferred Annuity – With a deferred annuity policy, your annuity income payments are deferred and don’t begin until a later date.
  • Immediate Annuity – With an immediate annuity policy, your annuity income will begin immediately.


Attempting to withdraw your money from your annuity before the age of 59 ½ can result in a penalty called premature distribution. Policies may also be subjected to surrender charges for early withdrawal. Although some policies do allow for partial withdrawals without these fees.

The Distribution Phase

When the accumulation phase is complete, an annuity moves into the distribution phase where the owner can withdraw their money or purchase an annuity payout plan. In an annuity payout plan, the owner of the policy will receive monthly payments for at least the remainder of their life. Although there are several payout plans that can be chosen:


  • Life Only – Payments in this type of payout plan continue for the life of the annuitant.
  • Life With 10 Years Certain – Payments in this payout plan will continue for the annuitant’s life, and are guaranteed for at least 10 years, even if the annuitant dies. In this case, a beneficiary would be paid the remainder of the payments.
  • Life With 20 Years Certain – Payments for this type of annuity payout plan will continue for the remainder of the annuitant’s life. If they die before the first 20 years are over, the plan will continue to payout to a beneficiary.

Ready to Learn More About Annuities?

If you are considering an annuity as a retirement vehicle, it’s time to speak to an experienced agent at Medi-Solutions Insurance Agency, LLC. Our team is dedicated to ensuring that each one of our customers has the information they need to make an educated decision about their retirement plans. Contact us today to schedule a consultation.


Disclaimer: Medi-Solutions Insurance Agency, LLC is not connected or endorsed by the US Govt. or Federal Medicare Program.  For informational purposes only.  Contact a licensed agent at Medi-Solutions Insurance Agency, LLC for proper annuity planning.


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