WTF is an Annuity?

You should know by now.

Hello again, Squad.

The Really Rich Journal

The individual investor should act consistently as an investor and not as a speculator.

Benjamin Graham

A special thank you to our sponsors who keep this Journal free to readers:

💰 Buy an income for life with Revise: Did you know that you can buy a guaranteed retirement income with zero investment risk? Learn more HERE.

The Weekly Tone

The most powerful longterm investing tool is something you’ll rarely hear about—or worse don’t quite understand.

Certainly, you’ll never see viral content created about it.

Of course, dear reader, we’re talking about annuities.

I wish someone had introduced me to annuities when I was much younger, but alas, hindsight is 20/20.

Annuities are essentially contracts you make with an insurance company. You give them money now or over time and they promise to pay you back later in installments. Think of it as reverse life insurance - it's there for when you outlive your income, savings, or nest egg.

And this is a very, very good thing.

There are three flavors of annuities - fixed annuities, variable annuities, and equity indexed or indexed annuities. In this discussion, we'll focus primarily on the equity indexed annuity.

An equity indexed annuity offers a minimum rate of return guaranteed by the insurance company and the opportunity to participate in the growth of an index, say the S&P 500. This means that you won't lose money even in big down periods. Your investment is protected, making equity index annuities a safer bet than the stock market.

The power of compounding in an annuity is magical.

Your money grows tax-deferred, which helps your investment grow at a faster rate. So even the smallest additions to the annuity can become a significant income source later down the line.

Now, you might be wondering about fees associated with annuities. Yes, as with all investment options, there are fees involved. These are referred to as loads and expenses. However, with thorough research, you can significantly minimize these costs.

The hands-off nature of these products is worth its (fee) weight in gold.

One of the most significant advantages of annuities over stocks is their tax treatment. The income earned on an annuity is deferred for a long time. This means your earnings aren't taxed until you decide to withdraw them, and only the portion of gain from your annuity is taxed.

To summarize, annuities are easy, linked to whatever index you want to invest in, tax-advantaged, and guaranteed by some of the oldest insurance providers in the country.

If you want to learn more about annuities, check out my company, and watch my new YouTube below (for a deeper dive).

💰 R/RR

Rich: Now.

Really Rich: I’ll take my time.

🎙️ This Week On The Really Rich Podcast

Learn about the power of annuities in this comprehensive guide. This video explains what annuities are, how they work, the different types available, and the benefits they offer, including their tax advantages and guaranteed income for life. The video also compares annuities to traditional stock market investments, and discusses the costs associated with annuities and how to manage them. If you're interested in securing a stable income for your retirement, this video is a must-watch.

Learn more at a platform offering personalized guidance on choosing the right annuity for you.

Podcast available on YouTube, Spotify, and Apple Podcasts.

🤝 How I can help you:

  1. The Entrepreneur’s Field Guide (Book) - learn the rules for entrepreneurship and how to blaze your own path.

  2. The Guided Journey (Course) - I’ll be your personal guide on your path to success in my comprehensive digital lecture course

  3. The Really Rich Podcast (Free) - a weekly deep dive into business, finance, and wealth mindset.