Are you worried about having enough money in retirement? It’s normal to feel anxious or nervous about maintaining a comfortable lifestyle when you retire and get older. One solution that brings financial security and peace of mind to many is having a guaranteed lifetime income that you can count on each month and have no worries about outliving your money!
When you retire, your financial focus shifts from the "Accumulation phase to the Preservation & Distribution phase".
What is the Accumulation Phase of Retirement: The accumulation phase refers to a period of 20 to 30 years or more where you are accumulating money before your retirement. Here, your reserves or assets are built up while you are working.
What is the Preservation Phase of Retirement: As you approach retirement, priorities shift from accumulation money to "Preservation" of the accumulated money where it is not exposed to risk / loss during your retirement.
What is the Distribution Phase of Retirement: Once you're at retirement age, you transition from saving money to where you begin to start receiving payments from your accumulated retirement money, this is called the distribution of funds phase. You are not putting money into your retirement accounts anymore. Instead the money you have accumulated and built over the years will begin to start to pay you during your retirement..
Annuities are a powerful tool for preserving your retirement assets while providing a steady income stream for the rest of your life.
Why Choose Annuities for Retirement Income?
Annuities are the only financial vehicle that can guarantee a lifetime income stream you cannot outlive! But, they offer more than just ongoing income. Here are the overall benefits:
Confidence in Retirement: Enjoy a reliable income stream for life.
Financial Protection: Annuities are backed by the financial strength and claims-paying ability of insurance carriers, which offer much more protection than banks do.
Added Security: Some insurance carriers are reinsured by others for added protection. Plus all are protected by your states, State Insurance Guaranty Association.
Growth Potential: Fixed index annuities credit interest based on index performance.
Tax-Deferred Growth: Your money grows tax-deferred until withdrawal or annuity payments begin.
Certain fixed and fixed index annuities offer flexibility, choices, and growth potential with lifetime income riders. These riders, available for an additional fee, can be tailored to your specific retirement needs.
Understanding Annuity Income Benefits
Debunking Common Annuity Myths
A common misconception is that when someone dies, their annuity money goes to the insurance company. This only applies to life-only immediate annuities with no certain period (life-only SPIAs). For most annuities, beneficiaries receive the remaining funds.
Annuity Income Riders: What You Need to Know
Annuity income riders guarantee income for life. These riders help you plan your retirement with a guaranteed minimum income without relying on indexing assumptions.
Key Benefits of Annuities with Income Riders
Tax-Free Growth: Avoid market volatility with fixed index annuities.
Guaranteed Income: Secure an income that lasts as long as you do.
Considerations and Fees
Income riders come with fees, which vary from one contract to another. It’s crucial to understand the fee structure, how it’s calculated, and whether it’s based on the income account value or the accumulation value.
FAQs
What is an annuity?
An annuity is a financial product backed by an insurance company that provides protection and a steady income stream in retirement, guaranteed for life.
How do annuity income riders work?
Income riders guarantee a income for life that you cannot outlive and, are available for an additional monthly fee.
Can beneficiaries receive money from an annuity?
Yes, except for life-only SPIAs, most annuities ensure beneficiaries receive the remaining funds.
What types of annuities offer guaranteed income?
There are several types of annuities that provide guaranteed income, including fixed annuities, variable annuities with income riders, and indexed annuities with guaranteed minimum withdrawal benefits. Each type has different features and benefits, making it important to choose the one that best fits your financial goals and risk tolerance.
Can I outlive the income from an annuity?
No, one of the main benefits of annuities is that they provide a lifetime income stream. This means you will continue to receive payments for as long as you live, regardless of how long that is. This feature provides peace of mind that you won’t run out of money in retirement.
What happens if I need access to my money?
While annuities are designed to provide a steady income stream, many offer liquidity options or withdrawal features. Some annuities allow you to access a portion of your money without penalty (up to 10%), while others may impose surrender charges for early withdrawals. It's important to understand the terms and conditions of your annuity contract to avoid any unexpected fees.
By understanding and leveraging annuities, you can secure a stable and predictable income in retirement, ensuring peace of mind and financial security.
Consult with a Financial Professional
If you’re considering an annuity with an income rider, consult with an independent financial professional. They can help you understand your needs, goals, and options, ensuring you choose the best solution for your retirement income. For more information or questions that you may about the only retirement vehicle that guarantees and income for life that you cannot outlive when you get ready to retire, please feel free to contact our office.
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