How confident are you that you will have enough income and assets to support a comfortable and enjoyable retirement? If you’re like many Americans, you may not be completely confident. According to a 2016 study from the Employee Benefit Research Institute, only 21 percent of Americans say they’re “very confident” that they will have enough money to live comfortably through their retirement years.1
That lack of confidence could stem from a number of issues. Many workers may still be feeling the effects of the recession of 2008-09. Others may be suffering from the reduction in pension programs offered by employers. And many people could simply be behind on their retirement savings efforts.
Fortunately, there are steps you can take to reduce your financial risk in retirement and boost your confidence. A broad range of tools can help you generate retirement income and provide a stable financial foundation.
One such tool is an annuity. While annuities are frequently misunderstood and may not be appropriate for everyone, they can have substantial benefits when used in the right situation. Below are a few tips on how you can use an annuity to boost your retirement confidence:
Annuities and Retirement Confidence
There are many different types of annuities, and each serves a variety of needs and objectives. At their core, however, most annuities are created to generate income. That income can be distributed either through withdrawals from the annuity policy or through what’s called annuitization.
In many cases, annuity income is guaranteed for life. It could even be guaranteed for your life and your spouse’s life. That stream of guaranteed income gives you some financial consistency and predictability in retirement, which may alleviate stress and concern and even boost your confidence.
How to Use Annuities to Generate Retirement Income
The type of annuity you use depends on your specific needs and goals. One option is to use an immediate annuity. With an immediate annuity, you contribute a lump sum into the annuity policy. That lump sum is then annuitized, or converted into a guaranteed stream of income based on your age and other factors. You lose access to your original premium, but you receive an income stream that’s guaranteed for life.
Other options include deferred annuities, in which your premiums are not annuitized immediately. Instead, your premiums have an opportunity to accumulate. Some annuities are fixed, which means growth comes through the payment of interest each year. Usually, fixed deferred annuities have no risk of loss.
There are also variable* deferred annuities. In these annuities, your funds are invested in a range of subaccounts, which are similar to mutual funds. They may offer more growth but also come with some level of risk. Fixed indexed annuities pay interest that’s tied to the performance of investment markets. You get some growth based on market returns but aren’t vulnerable to market risk.
Many deferred annuities come with optional benefits called riders that provide guaranteed income for life. For instance, you may be allowed to withdraw a certain percentage of your account value each year. As long as your withdrawal doesn’t exceed the allowed amount, the withdrawal is guaranteed for life. These types of optional benefits may come with additional fees.
Ready to explore annuities and how they can boost your retirement confidence? Let’s talk about it. Contact us today at TB Financial to learn more. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
1https://www.ebri.org/pdf/briefspdf/ebri_ib_422.mar16.rcs.pdf
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
Annuities are insurance products backed by the claims-paying ability of the issuing company; they are not FDIC insured; are not obligations or deposits of, and are not guaranteed or underwritten by any bank, savings and loan or credit union or its affiliates; are unrelated to and not a condition of the provision or term of any banking service or activity
Guaranteed lifetime income available through annuitization or the purchase of an optional lifetime income rider, a benefit for which an annual premium is charged. Annuities are long-term, tax-deferred vehicles designed for retirement and contain some limitations.
*Investors should consider the investment objectives, risks, charges and expenses of a variable annuity and its underlying investment options. The current prospectus and underlying prospectuses, which are contained in the same document, provide this and other important information. Please contact our Investment Professional or the issuing Company to obtain the prospectuses. Please read the prospectuses carefully before investing or sending money.
16695 – 2017/5/23