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Be Wise With Money

Making Sense of Mutual Funds & Annuities

social security, annuities, mutual funds, savings displayed on a road

Nowadays, Social Security and a savings account may not provide enough retirement income. Mutual funds and annuities can help, but do you really know how each can work for you?

How do these financial tools really work? 

Mutual funds hold a pool of investments. They offer no guarantees but can provide a higher return on your investment than a savings account. They also are riskier.

Annuities are insurance products that are designed to create a guaranteed future income. They can be structured to pay you a regular income on a monthly, quarterly or annual basis.

However you save, look at any product you buy as part of a whole. Know how it fits into your overall strategy.

Learn how mutual funds and annuities – or a combo of both – could help you reach your retirement goals.


How Does It Work?

How Do I Get Started?

What Are the Benefits?

What Are the Drawbacks?

Mutual Funds

You’re buying a collection of stocks, bonds and/or other investments managed by a professional. Choose funds with low risk or high risk, depending on your goals and preferences.


Most have a minimum investment amount, which differs by fund. Add money to your account at any time.


Because many mutual funds invest in stocks, they can increase in value at a rate higher than inflation. Mutual funds are an easy way to get into the market. And you can buy and sell at any time.


No income guarantees. Mutual funds are connected to the market, so you could lose money on your investment.


Single Premium Immediate Annuity (SPIA)

As the name suggests, an immediate annuity creates an immediate source of guaranteed income on a monthly, quarterly or annual basis. A Single Premium Immediate Annuity (SPIA) can pay out over a specified period of time, say 20 years, or it can be tied to your lifetime or two lifetimes (your’s and your spouse’s).


Talk with your advisor about how much income you need in retirement and make a one-time contribution. Generally, the more you contribute the larger your annuity payments will be.


Your payments will never decrease, even if the stock market does.


Your income isn’t tied to the market, so if the market does really well, your payment amount doesn’t increase.


Fixed Deferred Annuity

You can grow your assets with a guaranteed interest rate and you don’t pay taxes until you take your money out. It’s for people who don’t need money right away.


You can make one lump sum contribution or opt for a flexible premium deferred fixed annuity, which allows you to add more money over time.


Get a guaranteed interest rate with tax deferral. This can be a conservative part of your investment strategy.


You can’t access the full balance during the surrender period, which can range from three to 10 years (although you may be able to withdraw up to 10% per year without paying penalties, depending on the contract). Also, you could potentially earn less than the rate of inflation, which would limit purchasing power of earnings.

Variable Annuity

You can invest your contributions in a variety of investment options called subaccounts.  You can have different investments within one variable annuity, including stocks, bonds or fixed income accounts, as well as a fixed account with a guaranteed interest rate.


Purchase it up front with one lump sum or in a series of payments.

The value has the potential to grow based on the performance of the subaccounts. You also can add guarantees to the account, such as the ability to create lifetime withdrawals.



There are fees, which are based on the number of guarantees you want to come with your annuity. The value of your annuity can go down based on the investment performance of the subaccounts.




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