Retirement planning can be a complicated matter, partly because there are so many different options available to you. This is actually a good thing, because it means we can tailor a retirement income plan to your very unique situation and needs. Of course, the downside of having so many options is that it’s easy to become overwhelmed and confused by them.
Annuities are one of those confusing options. For a long time, annuities have been misunderstood by investors, and their popularity waned as a result. However, the financial industry has introduced several new types of annuities, which specifically address the needs of some investors, and they’re beginning to regain their popularity as a result.
Technically, an annuity is an insurance product, but they’re meant to provide a stream of income during your retirement years. While annuities vary according to each specific contract, the basic idea is that you purchase an annuity with a lump sum of money (or in some cases, a few payments). In exchange, you enjoy a predictable income during your retirement. You can place a large sum of money into an annuity, making it a good option if you inherit a sum of cash, earn a large profit from the sale of your home, or otherwise need to invest a significant amount of money.
Annuities are usually a tax-advantaged vehicle, meaning you don’t owe taxes on the income until you begin receiving payments. This is good news for those who enjoy a higher income during their working years, but expect to move down by one or two tax brackets after they retire.
As we mentioned, annuities are as varied as your needs. You might choose a policy that includes “death benefits”, meaning in the event of your premature death, your beneficiary will receive cash in the amount of the premiums you paid. You can choose a policy that lasts for a specific number of years, or one that guarantees* income as long as you live. You can even use an annuity to combat the power of inflation throughout your retirement years.
These are just some of the possible benefits of an annuity. For more information, schedule an appointment with us to discuss your situation. If you decide an annuity is right for you, we can help you sort through your options and decide upon a contract that is specifically tailored to your retirement planning needs.
*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.