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Understanding Mutual Funds and Annuities

Understanding Mutual Funds and Annuities

May 02, 2024

Are you on the brink of retirement or settling into your golden years? This chapter of your life can be exciting and rewarding, especially if you're well-prepared. One of the biggest concerns on your mind, however, is probably money. Besides ensuring that you have enough to cover your retirement, it's essential to understand how you'll meet your goals and priorities.

Mutual funds and annuities are two popular vehicles for retirement strategy, but they differ in a few key ways. Evaluate your risk tolerance, liquidity needs, and investment goals (both long and short) to decide what your best investment strategy is. Here’s a quick overview of each:

Mutual funds are purchased as shares that allow for long-term growth potential and offer the possibility of significant short-term profits. A mutual fund usually invests in stocks, bonds, or other various short-term investments. They’re professionally managed and can diversify your investment portfolio.

Annuities are agreements with an insurance company. You pay a lump sum up front and receive structured payments for the agreed-upon period of time. With fixed annuities, your money and profits are secure: as long as you live for the length of your annuity, you’ll see those payments and profits. In addition, in the event of premature death, some annuities willallow you to name a beneficiary who’s eligible to receive your annuity payment for the duration of the contract.

Understanding the intricacies of each option before you make any investment decision is important. Another common question is understanding the difference between a mutual fund and exchange-traded funds (ETFs). As you may remember, the IRS released new retirement contribution limits for 2024, so factoring these into your wealth management strategy is something I can help you navigate, too. 

To decide which vehicle is best for you, please call for additional information and to discuss your options.

Investing in mutual funds is subject to risk and potential loss of principal. There is no assurance or certainty that any investment or strategy will be successful in meeting its objectives. Investors should consider the investment objectives, risks and charges, and expenses of the fund carefully before investing. The prospectus contains this and other information about the funds. Contact issuing company to obtain a prospectus which should be read carefully before investing or sending money
There is a surrender charge imposed generally during the first 5 to 7 years that you own the annuity contract. Withdrawals prior to age 59 ½ may result in a 10% IRS tax penalty, in addition to any ordinary income tax. The guarantee of the annuity is backed by the financial strength of the underlying insurance company. Investment sub-account value will fluctuate with changes market conditions”
Investors should consider the investment objectives of the variable annuity carefully before investing. An investment in a variable annuity involves investment risk, including possible loss of principal. Variable annuities are designed for long-term investing. The contract, when redeemed, may be worth more or less than the total amount invested. Variable annuities are subject to insurance related charges including mortality and expense charges, administrative fees, and the expenses associated with the underlying funds. The prospectus contains this and other information about the variable annuity. Contact the issuing firm to obtain a prospectus, which should be read carefully before investing or sending money.