For Mark Roberts’ Use: What is your primary concern for your retirement years? If you’re like most people, you answered, “ I want to make sure my income lasts” or “I worry that I will outlive my money”. Those are valid concerns, and common ones. No wonder almost everyone is looking for a way to generate guaranteed income in retirement!
Because of the potential for guaranteed income, annuities are enjoying a resurgence in popularity. But annuity contracts can vary wildly in their offerings and “fine print”, so it’s important to learn the basics before you begin to narrow down your options.
There are two basic types of annuities, with many more beyond that, but at least the two basic types have straightforward names. An immediate annuity begins payments immediately, after you make a lump-sum payment for the contract, and the annual distributions continue for the rest of your life.
A deferred annuity works in a similar manner. You make a lump-sum payment, in exchange for lifetime payments from the insurance company. However, the payments do not begin immediately; they are deferred for a period of time, specified in your contract. Some people choose this option because they don’t need for payments to begin immediately, and waiting for a bit earns them larger payments in the future.
These are just the two basic types of annuities, with many more on the market. Variable and fixed-index annuity contracts function a bit more like investments, with some potential for growth. However these annuities are quite complex, and their guarantees vary wildly.
All annuities share one basic feature: You will exchange a sum of money for annual income that will last for the rest of your life. The risk, of course, is that you won’t live long enough to reap a satisfactory payback for your investment. Those of you who are married should consider both your own life expectancy and that of your spouse, before making a decision about annuities.
To learn more about annuities and lifetime income, give us a call. We can help you decide if an annuity would fit well into your portfolio.
Disclosure: Annuities are insurance products backed by the claims-paying ability of the issuer. Guarantees, including optional benefits, may contain limitations, including surrender charges, which may affect policy values.