For Mark Roberts’ Use: As you’re planning for retirement, you will be presented with many different options to provide you with a stream of income in your later years. An annuity is one such option, but these financial vehicles are still somewhat misunderstood among investors. Technically, they are insurance-based products, but an annuity serves to provide income during retirement. People tend to consider annuities for several different reasons, depending upon their individual situations.
If you’re interested in deferring taxes, an annuity might interest you. Generally speaking, you don’t owe taxes on annuity income until you begin receiving distributions, much as you do with a retirement account. Therefore, an annuity can help you save for retirement while deferring some income taxes until later, when you might be in a lower tax bracket.
If you have a large sum of money to invest, such as money you inherit from a parent or other relative, an annuity can provide you with some important benefits. You’re allowed to put a large sum of money into an annuity – much more than you’re allowed to place into an IRA or 401(k) plan each year.
There are many different types of annuities, offering a variety of payout options in retirement. This means that you can choose an annuity that offers the payout option that best benefits you.
Most annuities also offer flexible death benefits, meaning if you die before the annuitization stage, your beneficiary will receive a death benefit at least equal to the premiums you paid. Speaking of estate planning issues, an annuity can help you avoid probate after your death, meaning your beneficiaries can receive annuity proceeds without a long time delay or the expense of probate proceedings.
And of course, one of the major benefits of an annuity is the ability to ensure a stream of income that could last throughout your retirement. For retirees who are worried about outliving their money, or who want to ensure a level of income in retirement, an annuity can provide all of the right benefits.
As with most financial products, there is no one-size-fits-all annuity that is right for everyone. There are many different types of annuities, and different costs and benefits associated with each one. For more help sorting through your annuity options, give us a call to schedule an appointment. We would be happy to help you decide whether an annuity is right for you.