Which Annuity is Right for You?
Which Annuity is Right for You?
It's a crazy world out there, with a lot of conflicting financial information. To make the best decision, it's important to get educated about the different types of annuities and how they work.
Fixed Annuities
If you’re like many people, you worry about whether you’ll have enough money to last your retirement. Fixed annuities create a guaranteed stream of income you can’t outlive. You can establish income for your lifetime.
The key to financial security in retirement is having enough money to cover your expenses — and having confidence it will last your lifetime. When you add a fixed-income annuity to your retirement strategy, you can gain confidence and security.
Lifelong Income
Only an annuity can guarantee a lifetime of income you can’t outlive. Did you know you can also cover your spouse and have income for their lifetime too? What would you do with guaranteed lifetime income?
Predictability
Fixed annuities give the same amount of income on each payout, like a self-created pension. This predictability allows you to have peace of mind knowing when and how much income to expect and can help increase your budget for expenses.
No market risk
Retirement funds usually are associated with the stock market in some capacity. Fixed annuities have no link to the stock or housing market, so you don’t have to worry about income distributions (realizing losses) in down market years.
Income taxes
If you are funding your annuity with pretax money from a 401(k), IRA, or tax-sheltered money (qualified money), all of your payouts are taxed. If you are funding your income annuity with your after-tax money from a bank account or non-tax sheltered money (non-qualified money), you owe ordinary income taxes only on the earnings in each payout.
Once you have received your entire initial premium back in payouts, all additional income payouts become taxable at your ordinary income tax rate.
Indexed Annuities
Throughout your working life, you've focused on saving money for retirement. Now, you're also thinking about how to spend it. In an Indexed Annuity, when the market is expanding, you can accumulate money tax-deferred.
If there's a downturn, you're protected from market loss. When you’re ready to take income, an Income Rider gives you the ability to create a guaranteed “paycheck” to carry you through your retirement years.
Guaranteed Income
An optional Income Rider is available that allows you to create a guaranteed stream of income that can last as long as your retirement. The amount you receive can increase the longer you wait to start income payments.
Growth Potential
Pursue additional growth with Interest Credits that are based in part on the performance of an external market index.
Protection from downside market risk
Your money is not directly exposed to the risks of the stock market or individual stocks.
Tax deferral
Annuities provide the advantage of tax-deferred interest accumulation. You don’t pay taxes on any growth until you withdraw money.
Immediate Annuities
Single Premium Immediate Annuities (SPIA) create a guaranteed income for you immediately. This stream of income you can’t outlive. You can establish immediate income guaranteed for your lifetime.
A Single Premium Immediate Annuity (SPIA) allows you to put a lump sum of money into a contract and immediately give yourself an income you can’t outlive, guaranteed.
You can choose monthly, quarterly or annual income that allows you to have control over how often you receive the SPIA payout.
Guaranteed income
In exchange for a single purchase payment, you receive a stream of guaranteed income that begins immediately (up to 12 months
after the date your contract is issued). You can receive guaranteed income for life, for a specific length of time, or a combination of both, depending on the annuity option you choose.
Predictability
An SPIA provides a reliable source of income that is not affected by
fluctuations in the stock market. At the
time you purchase a contract, you know how much income you will receive.
Tax efficiency
If you’ve already paid taxes on the money used to purchase your annuity contract, a portion of each annuity payment will be tax-free, until the total amount of income you’ve
received equals the amount of your single purchase payment.
Flexibility
An SPIA offers you a certain amount of flexibility, including the ability to add an inflation protection rider that can automatically increase income payments by your choice of one, two, three, or four percent annually.
You can also adjust for a period certain which means you can decrease or increase the period of time you will receive income payments. And you can select an annuity option that includes beneficiary protection for a spouse or loved one that can protect your designated beneficiary in the event of your death.
Fixed Annuities
If you’re like many people, you worry about whether you’ll have enough money to last your retirement. Fixed annuities create a guaranteed stream of income you can’t outlive. You can establish income for your lifetime.
The key to financial security in retirement is having enough money to cover your expenses — and having confidence it will last your lifetime. When you add a fixed-income annuity to your retirement strategy, you can gain confidence and security.
Lifelong Income
Only an annuity can guarantee a lifetime of income you can’t outlive. Did you know you can also cover your spouse and have income for their lifetime too? What would you do with guaranteed lifetime income?
Predictability
Fixed annuities give the same amount of income on each payout, like a self-created pension. This predictability allows you to have peace of mind knowing when and how much income to expect and can help increase your budget for expenses.
No market risk
Retirement funds usually are associated with the stock market in some capacity. Fixed annuities have no link to the stock or housing market, so you don’t have to worry about income distributions (realizing losses) in down market years.
Income taxes
If you are funding your annuity with pretax money from a 401(k), IRA, or tax-sheltered money (qualified money), all of your payouts are taxed. If you are funding your income annuity with your after-tax money from a bank account or non-tax sheltered money (non-qualified money), you owe ordinary income taxes only on the earnings in each payout.
Once you have received your entire initial premium back in payouts, all additional income payouts become taxable at your ordinary income tax rate.
Indexed Annuities
Throughout your working life, you've focused on saving money for retirement. Now, you're also thinking about how to spend it. In an Indexed Annuity, when the market is expanding, you can accumulate money tax-deferred.
If there's a downturn, you're protected from market loss. When you’re ready to take income, an Income Rider gives you the ability to create a guaranteed “paycheck” to carry you through your retirement years.
Guaranteed Income
An optional Income Rider is available that allows you to create a guaranteed stream of income that can last as long as your retirement. The amount you receive can increase the longer you wait to start income payments.
Growth Potential
Pursue additional growth with Interest Credits that are based in part on the performance of an external market index.
Protection from downside market risk
Your money is not directly exposed to the risks of the stock market or individual stocks.
Tax deferral
Annuities provide the advantage of tax-deferred interest accumulation. You don’t pay taxes on any growth until you withdraw money.
Immediate Annuities
Single Premium Immediate Annuities (SPIA) create a guaranteed income for you immediately. This stream of income you can’t outlive. You can establish immediate income guaranteed for your lifetime.
A Single Premium Immediate Annuity (SPIA) allows you to put a lump sum of money into a contract and immediately give yourself an income you can’t outlive, guaranteed.
You can choose monthly, quarterly or annual income that allows you to have control over how often you receive the SPIA payout.
Guaranteed income
In exchange for a single purchase payment, you receive a stream of guaranteed income that begins immediately (up to 12 months after the date your contract is issued). You can receive guaranteed income for life, for a specific length of time, or a combination of both, depending on the annuity option you choose.
Predictability
A SPIA provides a reliable source of income that is not affected by fluctuations in the stock market. At the time you purchase a contract, you know how much income you will receive.
Tax efficiency
If you’ve already paid taxes on the money used to purchase your annuity contract, a portion of each annuity payment will be tax-free, until the total amount of income you’ve
received equals the amount of your single purchase payment.
Flexibility
An SPIA offers you a certain amount of flexibility, including the ability to add an inflation protection rider that can automatically increase income payments by your choice of one, two, three, or four percent annually.
You can also adjust for a period certain which means you can decrease or increase the
period of time you will receive income payments. And you can select an annuity option that includes beneficiary protection for a spouse or loved one that can protect your
designated beneficiary in the event of your death.
5 Ways an Annuity Could Work for You:
1) Self-Created Pension
A pension is a type of retirement plan offered by companies that provide retired employees with a lifetime income on an ongoing basis. Today, many companies are not offering pensions and only annuities can guarantee lifetime income.
2) Supplement to Social Security
Living on Social Security alone is difficult. Using your fixed annuity, you can choose to receive income payouts annually, quarterly, or monthly to help supplement your Social Security check. This can provide a stronger reliable income.
3) Inflation protection
Worried about future inflation when purchasing an annuity? If you have the income payment increase rider, your payouts increase every year based on the percentage you select when you apply for your fixed annuity or indexed annuity.
4) Increased income over other investments
An annuity may allow for a higher withdrawal rate than you can take from an investment portfolio if longevity runs in your family. SPIA and FDIA payouts are guaranteed and calculated based on the amount contributed and the average mortality rate (the percentage of people who die each year and at what age). The annual payout of an SPIA and FDIA is usually between 5 and 7 percent of your premium. Can you take 5 to 7 percent out of your investment portfolio each year and know it will last your lifetime?
5) Buffer to the investment portfolio
Acknowledging that traditional investments like stocks, bonds, and mutual funds have good years and bad years due to the market’s fluctuation, a fixed annuity can be used to complement your other investments. By placing some money into the fixed annuity, in a down market year you can minimize some market losses if you know you will get guaranteed income from a fixed annuity or indexed annuity.
5 Ways an Annuity Could Work for You:
1) Self-Created Pension —
A pension is a type of retirement plan offered by companies that provide retired employees a lifetime income on an ongoing basis. Today, many companies are not offering pensions and only annuities can guarantee lifetime income.
2) Supplement to Social Security —
Living on Social Security alone is difficult. Using your fixed annuity, you can choose to receive income payouts annually, quarterly, or monthly to help supplement your Social Security check. This can provide a stronger reliable income.
3) Inflation protection —
Worried about future inflation when purchasing an annuity? If you have the income payment increase rider, your payouts increase every year based on the percentage you select when you apply for your fixed annuity or indexed annuity.
4) Increased income over other investments —
An annuity may allow for a higher withdrawal rate than you can take from an investment portfolio if longevity runs in your family. SPIA and FDIA payouts are guaranteed and calculated based on the amount contributed and the average mortality rate (the percentage of people who die each year and at what age). The annual payout of an SPIA and FDIA is usually between 5 and 7 percent of your premium. Can you take 5 to 7 percent out of your investment portfolio each year and know it will last your lifetime?
5) Buffer to investment portfolio —