Learn About Annuities

Annuities come in several variations but the types of annuities that can play useful roles in retirement and retirement planning are really only fixed or fixed index annuities. Variable annuities are not good solutions for most investors.

Annuities in their simplest definition are contracts between individuals and insurance companies, wherein the individual pays a sum of money to an insurance company in the expectation of immediate or future benefits which usually take the form of an income stream.

Employers have been phasing out pensions for nearly a generation, leaving a major hole in the retirement planning of many Americans.

Fixed Annuities or Fixed Index Annuities (“FIA”) can fill that hole by replacing the guaranteed income stream from a pension with a guaranteed income stream from an annuity.


What are the biggest benefits of Fixed Annuities and Fixed Index Annuities?

It’s simple, actually. They guarantee an income stream for life without risking stock market losses. There are several ways these types of annuities fit into an effective retirement plan.

For Affluent Retirees:

  • Guarantee an income stream that is likely to grow and keep up with inflation.
  • Reduce or eliminate the need to draw on an investment portfolio for living expenses.
  • Reduce or eliminate Required Minimum Distributions from retirement investment accounts.
  • Give investments longer time effective time frames for compounding, which gives better opportunities for higher returns.
  • Help investors experience more freedom in discretionary retirement spending.
  • Can increase the legacy assets for heirs due to extending investment time frames.

For Less Affluent Retirees:

  • Secure an income stream that is likely to grow without being forced into the risks of the stock market.
  • Peace of mind knowing there will always be an income to supplement social security.
  • Take away the fear that an unexpected market crash will end retirement and force them back to work

What You Need To Understand About Fixed Annuities and Fixed Index Annuities:

  • Make sure your annuity is backed by a financially strong, major insurer. In this case, bigger is mostly better.
  • Understand that what’s important about the annuity you select isn’t just the interest rate you get, but the income that you pull out of the annuity. In many cases, annuities that advertise higher interest rates (8% Annuity!! Click Here to Learn More!) actually pay out less than annuities that credit your account at lower interest rates.

Say what?

Here’s how it works. Annuities are typically separated into an accumulation account and an income account. What matters for your retirement is the income account, but what’s usually advertised is the rate paid on the accumulation account. That’s a lot less important than the payout rate on the income account.

Let’s say you are going to put $100k into an annuity and you are offered two choices.  The insurance agent tells you the first pays 8% and the second 5%.   What he doesn’t tell you, because he wants the quick sale or maybe even just doesn’t know because he isn’t a financial planner, is that the 8% annuity has a 4% payout rate, but the 5% annuity features a 4.5% payout rate.

Most people will hear 8% that pays out 4% and assume that’s better than 5% that pays out 4.5%, but it isn’t. Let’s pretend this is a Fixed Annuity and you start taking income payments after the first year.

Annuity 1: $108,000 x .04 = $4,320 annual payout.
Annuity 2: $105,000 x .045 = $4,725 annual payout.

Over 20 years the person that picked the 8% annuity will lose out on nearly $10,000 in additional income the person that picked the 5% annuity received.

You can see it’s important not to let an insurance salesperson tell you the best annuity for you is the one that pays the highest interest, because what’s important is WHAT YOUR ANNUITY PAYS YOU EACH YEAR, NOT WHAT INTEREST RATE IT EARNS!

More Annuity Tips:

  •  In general, the lower the fees the better. The best Fixed Index Annuities don’t have add-on fees at all – instead the insurance company makes their money on earnings from above the “cap” on your credited interest rate. In English – you get everything below X percent, the insurance gets everything above. In almost all cases, this structure is better than a “spread fee” where the insurer charges a fee no matter what happens in your annuity. Spread fee annuities are often in the 2% area and many times, but not always, accompanied by an additional rider or admin fee that can be another 1% or more. In many cases, it’s better to look for a capped structure rather than paying direct fees to the annuity provider.

CLICK HERE to learn about common Annuity Myths.

Questions?  Use the contact button and a planner will get back to you with a thoughtful response shortly.

Need some help figuring out which type of retirement income is best for you? 
CLICK HERE to have a planner compare bonds, dividend payers, alternatives such as MLP’s and annuities with you.

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Reports prepared by financial planners licensed in your state. Planners must be licensed and registered fiduciary Investment Advisors. Rate quotes provided by licensed insurance agents in your state. By completing the form above and requesting information, you are giving permission to contact you to verify your information and to obtain rate quotes on your behalf from insurance agents licensed in your state. Copyright 2015 Real Retirement Income.COM.

Investment Management

For ACI, investment management begins with understanding and actively managing risk for our clients and partners.  We do this through smarter investments built on low cost, highly liquid and diversified investments rather than expensive financial products.


Understanding the needs of investors seeking stable results for portfolios greater than $500,000 is a core strength of ACI.  One of the most important things we do is help your investments to create stable income while generating sufficient growth to meet your future demands and the needs of those you care for. 

ACI uses customized planning and software to create retirement income plans to meet the specific needs of each of clients while providing confidence, flexibility, and cost efficiency.


Success in any endeavor comes from hard work, vision, and planning. We can help you create a more confident future by working with you, your CPA, your tax and estate counsel to make sure that when the tomorrow becomes today, you are where you want to be.

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Market Income

This portfolio invests in a basket of highly liquid Index or Sector securities and sells off atypical returns in exchange for a premium on a rolling basis. That’s a fancy way of saying we take the bird in hand and let someone else have the two in the bush.  We buy sectors that are undervalued relative to the rest of the market or vs. their historical value ranges which reduces downside risk vs. the broad market.  Typically out-performs in bear markets, neutral markets and mild bull markets, and under-performs strong bull markets.

Core Equity

Invests in diversified components of the financial markets and broad economy by targeting sectors which demonstrate the greatest potential for a consistent range of multi-year returns, while offering a risk adjusted investment profile equal to or lower than the broad markets.  Our research tells us which sectors demonstrate the greatest potential for consistent multi-year returns while offering greater risk efficiency than the broad markets.  We invest on an “Outcome Oriented” basis – meaning we have a good idea what the returns over time will be at a given purchase price.

Durable Opportunities

This portfolio invests in companies possessing a Durable Competitive Advantage.  Such companies are likely to be around for decades, easing the concern of principal return.  DCA companies often suffer less in bear markets and usually lead recoveries.  These companies allow ACI to build portfolios with minimum expected returns that can be in the mid-single digit range over any 3-5 year period which can provide long term stability partnered with long term growth in equity.

Full Cycle

This portfolio is derived from the ground breaking work in ‘risk parity’ by Ray Dalio, arguably one of the top 10 money managers in history and founder of Bridgewater Associates.  The Full Cycle portfolio is built on the allocation models Ray designed to provide the highest potential risk adjusted returns possible through all phases of the economic cycle.  Bridgewater’s “All Weather” fund was designed for pension funds and other large institutional investors that needed to earn stable returns with stable risk, and has been closed to new investors for years.  At the time the fund closed, the All Weather Portfolio had a minimum required investment of $100 million.

Equity Builder

This is a risk management overlay which helps build and protect accounts by collecting small premiums against held positions on an opportunistic basis during correcting markets through synthetic “short” positions.  EQB seeks to collect an extra 2% – 5% per year against the cost of underlying investments.  While primarily targeted at increasing account equity, EQB gives an extra layer of protection to capital during periods of higher volatility.

Fixed Income

Diversified, broad exposure to fixed income ETFs and best of breed no load funds including core fixed income components such as Government, Corporate or MBS, municipals, and unconstrained “Go Anywhere” funds.

Investment Team


Dak Hartsock; Investment manager with over 15 years of experience with securities & securities options. Dak has worked full time in the financial markets since 2007. He has more than a decade of operating experience as a business owner & developer. He is a graduate of the University of Virginia.

Robert Hartsock; MBA. Bob has over 30 years of senior management experience in diverse markets, products and businesses. He brings an exceptional record that includes management roles in two Fortune 500 companies and leadership of 7,500+ employees. Bob’s career features a specialization in identifying and fixing management and operational problems for multiple companies including leading over a dozen acquisitions, private placements and a public offering. He is uniquely positioned to provide ACI with highly relevant C-Level management perspective. Bob provides operational & macro perspective on investments ACI undertakes for client portfolios. Bob holds degrees from University of Illinois and University of Washington.

Process Portfolios is a dba of ACI Wealth Advisors, LLC.

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