Annuities
Finding Inspiration in Every Turn
An annuity allows a customer to deposit money (premiums) with an insurance company that can earn interest and grow on a tax-deferred basis with the agreement that the insurance company will then provide a series of payments back to the customer at regular intervals.
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People typically purchase annuities to provide or supplement retirement income they will receive from Social Security, pension benefits, investments, and other sources. You can convert your annuity into a stream of income that can then be paid over a fixed period or for your lifetime. You can take withdrawals of varying amounts when you need the income.
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There are generally two different types of annuities:
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IMMEDIATE
Provides income payments that normally begin within a year after the premium is paid.
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DEFERRED
Provide income payments that begin later, often after many years. Deferred annuities are designed for long-term savings purposes.
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Available to purchase using a single lump sum, or with flexible premiums over time.
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When it comes time to take income from your deferred annuity, you will have many options available to meet your needs.
Annuities can be a valuable addition to your financial plan, offering guaranteed income, tax advantages, protection against market risks, and peace of mind. By carefully considering your financial goals and needs, you can determine if annuities are a suitable option for securing your retirement and providing long-term financial stability.
Here are some key points to consider:
Guaranteed Income
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Lifetime Payments: Annuities can provide a steady stream of income for life, ensuring you don't outlive your savings.
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Predictable Cash Flow: Regular, predictable payments can help cover essential expenses in retirement.
Tax Advantages
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Tax-Deferred Growth: The investment earnings in annuities grow tax-deferred until you withdraw them, allowing your investment to compound over time.
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Potential Lower Tax Bracket: Withdrawals in retirement may be taxed at a lower rate than during your working years.
Financial Security
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Protection Against Market Volatility: Fixed annuities offer guaranteed returns, protecting your investment from market fluctuations.
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Principal Protection: Some annuities, like fixed or indexed annuities, protect your principal investment.
Diversification
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Portfolio Diversification: Annuities can add stability to your investment portfolio, balancing riskier investments like stocks.
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Income Source Diversification: Provides an additional income source alongside Social Security, pensions, and other retirement savings.
Estate Planning
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Beneficiary Designations: Annuities can be structured to provide death benefits to beneficiaries, helping with estate planning and wealth transfer.
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Probate Avoidance: Annuities can bypass probate, ensuring a faster and potentially less costly transfer of assets to heirs.
Inflation Protection
Cost of Living Adjustments: Some annuities offer options for increasing payments to keep pace with inflation, preserving your purchasing power over time.
Long-Term Care
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Long-Term Care Riders: Some annuities offer riders that can help cover long-term care expenses, providing additional financial protection if you need care.​
Flexibility
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Customization: Annuities come in various forms (fixed, variable, indexed, immediate, and deferred), allowing you to choose one that best fits your financial goals and risk tolerance.
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Withdrawal Options: Many annuities offer flexible withdrawal options, allowing you to access funds if needed.
Legacy Planning
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Guaranteed Payout Periods: You can choose options that guarantee payments for a certain period, ensuring your heirs receive benefits even if you pass away early.
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Charitable Giving: Annuities can be used as a tool for charitable donations, providing income during your life and benefiting your chosen charity afterward.
Peace of Mind
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Financial Confidence: Knowing you have a guaranteed income stream can provide peace of mind and reduce financial stress in retirement.
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Predictable Budgeting: Fixed income from annuities helps with budgeting and financial planning, ensuring you meet your financial obligations and lifestyle needs.