Consider Certainty in Your Retirement Portfolio, With Annuities
An annuity is a contract between you and an insurance company. You pay the insurance company a sum of money, either in a lump sum or over time. In return, the insurance company promises to make payments to you, either immediately or in the future. Annuities can be a good way to provide yourself with a guaranteed income stream in retirement.
How do annuities work?
- Deferred annuities: With a deferred annuity, your payments grow tax-deferred until you start receiving them. This means that you won’t have to pay taxes on your earnings until you withdraw them.
- Immediate annuities: With an immediate annuity, you start receiving payments immediately. Your payments will be based on the amount of money you invested, the age at which you annuitize, and the type of annuity you choose.
What are the benefits of annuities?
- Guaranteed income stream: Annuities can provide you with a guaranteed income stream in retirement. This can help you to meet your living expenses and avoid outliving your money.
- Tax-deferred growth: Deferred annuities offer tax-deferred growth. This means that you won’t have to pay taxes on your earnings until you withdraw them.
- Protection from creditors: Annuities are generally protected from creditors. This means that your annuity payments cannot be garnished by creditors, such as to pay off a judgment.
There are also some risks associated with annuities, including:
- Fees: Annuities can have high fees. These fees can reduce your earnings and make it more difficult to meet your retirement goals.
- Limited investment options: Annuities typically offer limited investment options. This means that you may not be able to invest your money in the way that you want.
- Surrender charges: If you withdraw money from your annuity before it matures, you may be charged a surrender charge. This can significantly reduce the amount of money you receive.
Are annuities right for you?
Whether or not annuities are right for you depends on your individual circumstances. If you are looking for a guaranteed income stream in retirement and you are comfortable with the risks involved, then annuities may be a good option for you. However, if you are not comfortable with the risks or if you want more control over your investments, then annuities may not be right for you.
How to get started with annuities
If you are interested in learning more about annuities, you should talk to a financial advisor. A financial advisor can help you to understand the different types of annuities and to choose the one that is right for you.
Here are some additional things to keep in mind about annuities:
- Annuities are not a substitute for Social Security or other retirement savings.
- Annuities are complex financial products. You should carefully read the annuity contract before you invest.
This information is not intended to be a substitute for professional financial advice. You should always consult with a financial advisor before making any investment decisions.