Saving for Your Retirement Years with Annuities

Saving for your retirement can be a daunting task. You may be disciplined enough to put aside a portion of your income each month, but what is the best way to make that money grow? Consider an annuity in addition to your IRAs and 401(k)s.

There are a number of reasons why annuities are such a popular choice for individuals looking to save for retirement. For most retirees, their greatest concern is outliving their assets. Savings within an annuity can be converted into a series of steady income payments (called annuitizing your contract). You can elect to receive these payments for a set time period, or can choose a guaranteed income for life, a feature only available in annuities. Inflation is another factor affecting whether you will have enough income to live on throughout your retirement. With an annuity, your earnings accrue tax deferred, allowing your savings to work harder for you to help fight inflation.[1] Also, with some annuities, you can take advantage of current favorable interest rates by locking in a guaranteed interest rate for a specific period of time.

The death benefit provided by annuities is another lesser-known attribute. With an annuity, all death benefit proceeds pass outside of probate (if payable to a beneficiary other than the estate) so your beneficiaries avoid lengthy delays in receiving your bequest. Also, if your spouse is listed as the primary beneficiary, they may have the option to assume ownership of the annuity, enabling them to continue to accrue earnings on a tax-deferred basis.

So what exactly is an annuity? An annuity is a contract with an insurance company where you deposit money into the annuity and receive payments beginning sometime in the future at regular intervals. There are several types of annuities to meet your needs.

A fixed deferred annuity enables you to make a single lump sum deposit, or several contributions over time, with the option of receiving payments beginning at a specific date in the future. This annuity option is best for saving money over the long-term towards retirement.

A fixed immediate annuity is the same except annuity payments begin right away or within a short time after a lump sum deposit is made. This annuity option is best if you wish to convert existing savings into a guaranteed income stream right away.[2]

There are other types of annuities that offer variable investment divisions, such as equities, bonds, etc. Variable annuities also allow your earnings to accrue tax deferred. This type of annuity would be more appropriate for individuals looking for potential higher returns, but who are also willing to take a higher risk to achieve that goal.

In short, the benefits of annuities are numerous and an annuity may provide you with the exact type of savings vehicle you need in order to plan for your future. Contact us today with questions or for help in finding the right type of annuity to meet your future retirement goals.

Withdrawals of earnings are subject to ordinary income tax and, if taken prior to age 59½, may be subject to a 10% federal tax penalty. Your annuity contract may be subject to a contingent deferred sales charge (CDSC).

[1]If you are purchasing an annuity to fund a tax-qualified retirement plan (IRA, SEP, SIMPLE IRA), you should be aware that this tax deferral feature is available with any investment vehicle and is not unique to an annuity. Carefully consider the features and benefits of the annuity in making the decision to purchase it.

[2]Guarantees are based on the claims-paying ability of the issuing insurance company.

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