An annuity is a contract that can make payments to you at regular intervals based on premiums that you pay for the contract. The main reason to buy an annuity contract is to obtain an income, usually for retirement purposes. The key benefits of annuities are access to an income you cannot outlive and potential relief for your family from probate after you are gone. In addition, investing in an annuity provides safety for your principal as well as tax-deferred growth of funds.

Currently, one of the many advantages of an annuity is that the interest credited to your annuity is completely free from federal income tax during the accumulation period. As a result of tax-deferral, interest is compounded and your investment grows at a faster rate. You pay no taxes until you begin to receive income payments or make a withdrawal.

Annuity income payments are often made in a lump sum or monthly, although other frequencies are available. An annuity contract is not a life insurance policy or a health insurance policy. It is not a savings account or savings certificate, nor should it be bought for short-term purposes. To learn more about how annuities can play an important role in your financial security, please feel free to contact our office or simply e-mail us at

Types of Annuities

Fixed Annuities

A fixed annuity gives you the stability of a fixed interest rate that is determined by the Company and is guaranteed never to be below a minimum interest rate. It is an investment vehicle that guarantees a stream of fixed payments over the life of the annuity. A fixed annuity can be a deferred annuity, for which there is time elapsed between the Purchase Payment and the stream of payments, or an immediate annuity, which gives you access to a stream of income immediately after you purchase it. Also, a fixed annuity can be flexible premium or single premium. Flexible premium annuities allow for multiple purchase payments, while a single premium annuity requires one lump-sum Purchase Payment.

Fixed-Indexed Annuities

A fixed-indexed annuity is a variation of a traditional fixed annuity and gives you the opportunity to earn interest at an interest rate that is determined according to a formula based, in part, on the change of a referenced index, like the S&P500 or Dow Jones. It is a way to have market like returns without any of the downside risk. The advantage of a fixed-indexed annuity is that you won't lose your money regardless of index performance. Plus, your indexed interest locks in each year and can never be lost. Fixed-indexed annuities can also be flexible or single premium.

Variable Annuities

A variable annuity is a deferred annuity that allows you to participate in the investment of annuity funds by determining how much of the Purchase Payment will be invested in a series of mutual fund like accounts. These accounts can range from general accounts to a series of sub accounts tied to various financial markets. Variable annuities can allow for flexible premiums and single premiums. They are NOT guaranteed and can go down in value unlike fixed annuities.

PLEASE NOTE: At Compass Income we DO NOT offer VARIABLE annuities due to the RISK and HIGH EXPENSES usually associated with them. We feel that they are especially inappropriate for ages 60 and above due to possible losses of principal due to market loss. If you have a variable annuity or may be thinking about purchasing one and would like to insure that it is appropriate for you please feel free to contact our office or simply e-mail us at Your privacy is assured.

What about the representative at my bank?

Just because an agent is sitting at a desk in your local bank branch does not guarantee he is experienced. In fact the referral system in most banks is very attractive to newer, inexperienced reps that do not have an established customer base. Many of these referral systems are set up to pay tellers (who have access to your personal and confidential account information) as much as $25 each time they introduce a customer to the investment rep. Banks often establish quotas for the number of people the branch must refer to the investment rep each month.