Your guide to
Annuities in Texas
An annuity is a long-term contract with an insurance company that can help you save for retirement or receive income later. Our agency helps you understand how annuities work, what they can and cannot do, and which terms to review.
What it covers
How annuities work
Every annuity is a contract, and its terms set how money goes in, how it may grow and how it is paid out. Review the contract closely before you buy.
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The contract
You pay the insurance company a lump sum or a series of payments, and the contract spells out how your money is credited and paid out.
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Accumulation period
While your money is in the contract it can grow, and earnings are generally not taxed until you withdraw them.
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Fixed annuities
A fixed annuity generally credits a set interest rate for a period defined in the contract.
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Fixed indexed annuities
Interest is linked to the performance of a market index, within limits such as caps or participation rates set in the contract.
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Income payments
You may be able to turn the value into regular payments for a set period or for life, depending on the options you choose.
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Surrender charges
Annuities are long-term contracts. Withdrawing more than the contract allows in the early years may trigger surrender charges.
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Beneficiaries
Depending on the contract, beneficiaries you name may receive a death benefit if you pass away before the money is paid out.
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Why it matters
Understand the terms before you sign
Annuities can be useful for some retirement goals, but they are not a fit for every situation. They are designed for money you do not expect to need for a while, and taking it out early can be costly.
Before you buy, it helps to know how the contract credits interest, which surrender charges apply and for how long, what fees or rider costs are included, and how taxes may apply to withdrawals. A tax professional can answer questions about your own situation.
An annuity is a long-term commitment, so it helps to keep enough savings elsewhere for emergencies and short-term needs.
Common uses
What people use annuities for
- Saving for retirement
- Turning savings into income
- Income for a set period
- Lifetime income options
- Long-term savings
- Leaving money to beneficiaries
Questions to ask before you buy
- How is interest credited?
- How long do surrender charges last?
- What fees or rider costs apply?
- How can I access my money?
- What happens if I pass away?
Answers
Annuity questions
Straight answers to common questions. If yours is not here, call or text our agency.
No. Both are offered by insurance companies, but life insurance is mainly designed to pay a benefit when you pass away, while an annuity is mainly designed to help you save for retirement or receive income.
Many contracts allow limited withdrawals, but taking out more during the surrender period may trigger surrender charges, and withdrawals may have tax consequences. Review the contract and ask a tax professional about your situation.
A fixed annuity generally credits a set rate defined in the contract. A fixed indexed annuity credits interest based partly on a market index, within limits the contract sets, so the interest credited can vary.
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