What if the insurance company fails?
The insurance company backs the guarantee. It depends on that company's ability to pay. Annuities aren't FDIC insured.
The fair worry
If you're counting on income, you want to know who's sending it. The word "guaranteed" needs more than a glance.
The answer
The insurance company owes the benefits written in the contract. So the payment terms tell you what you're owed. The company behind them is who you depend on to pay.
That's why I wouldn't stop at the amount of a promised paycheck. If you'd use it for groceries and housing, you need to understand what's behind it. Put the promise and the company together when you look at that income.
The downside
If the company has money trouble, it may not be able to pay. A guarantee doesn't remove the risk that the company could fail.
At your consultation
Keep your free consultation to see what income YOU would depend on. Your retirement advisor will connect that need to the promise and the company behind it.
More questions on this topic
- What is an annuity?An annuity is a contract with an insurance company. You put money in for growth, a retirement paycheck, or both.
- Can I lose money if the market drops?It depends on the type. Fixed and fixed indexed annuities protect your savings from market drops. Variable and index-linked annuities can lose money.
- Will I lose access to my money?Yes, an annuity can limit access. Some charge for early withdrawals. Turning money into lifetime payments generally means giving up control.