For Mark Roberts’ Use: Retirement is a major life change, and it’s no wonder that you worry about it. Possibly the most common fear is the possibility of outliving your money. Could you actually run out of money in retirement? Social Security will always be there, of course, but most of us can’t live on that type of income alone. We all need to set up some form of income that will last the rest of our lives – however long that may be. And with more people living into their 90s than ever before, some of us might be looking at a thirty-year retirement!
One way to establish a secure stream of lifetime income is by selecting an immediate annuity contract. In exchange for a lump sum payment to an insurance company, you receive a fixed amount of income each year for the length of the contract. With many annuities it is possible to select a “lifetime” option, meaning that these payments continue for as long as you live. Payouts are linked to today’s interest rates, so some people choose to wait for high interest rates before selecting an annuity.
Sounds like a great plan, right? Naturally, there are drawbacks. The payments do only continue for as long as you live. So for many people an annuity is a great idea, but it might not be right for you if you hoped to leave a sum of cash to your heirs. If it’s your spouse you’re worried about, you can add him or her to the policy and payments will continue until both of you have died.
Some people view annuities as a gamble, because there is always the possibility that you will pass away much sooner than you had expected. For this reason, choosing an annuity can be a very personal decision based upon your parents’ longevity, your current state of health, and even your intuition about your lifespan. If you do expect to enjoy a very long retirement, an annuity can work out to be the ideal income solution.
For those who are very confident about a long life span, a deferred-income annuity is another great option. Your payments won’t start until a later date, but you receive larger disbursements. For this reason, a deferred-income annuity might be a good choice for the retiree whose retirement plan distributions will be exhausted at some point.
Immediate annuities and deferred-income annuities are just two of the ways retirees can establish secure streams of retirement income. The annuity market is vast, and includes about as many options as you could possibly imagine. For more information on annuities, give us a call. It is very likely that there is an annuity product that perfectly suits your needs.
Disclosure: 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.