Many retirees today are concerned about whether or not they have enough money to last their lifetime—and potentially beyond. The prolonged low interest rate environment has made this an even more acute concern for many investors. This is where annuities that provide guaranteed lifetime income can be particularly useful.
With a guaranteed income annuity, you pay a lump sum to an insurance company, or make a series of payments over time, in exchange for regular payments that are guaranteed to last your entire lifetime—no matter how many years that is. You can select how often you receive your income. Many investors choose a monthly option, though you can also pick between quarterly or annual payments. How much you invest initially will depend on how much you need each month to cover your expenses, which is something your financial advisor can assist you in determining.
Annuities are often misunderstood and because of this some people shy away from them—even though they might be very appropriate for their circumstances. Consider a recent study by Greenwald & Associates and CANNEX showing that 61 percent of Americans age 55 to 75 put a high value on having guaranteed lifetime income as a supplement to Social Security. However, very few people own financial products that provide guaranteed lifetime income, the study found.
Many retirees we work with are concerned about overspending and draining their hard-earned savings. While you can always adjust your discretionary spending, it can be nerve-wracking to live with the perpetual fear of running out of money. This is where an annuity that provides guaranteed lifetime income can be very useful. You know exactly how much you have coming in—monthly, quarterly or annually—to supplement other income like Social Security, employer-sponsored retirement plans and military benefits. Plus, with certain types of annuities, you can add the option to provide a lifetime guaranteed income for your spouse as well. This means that the guaranteed income from your annuity will extend until your spouse passes away.
Here’s another often overlooked benefit of annuities—tax deferred treatment. Typical retirement accounts like IRAs and employer-sponsored accounts grow tax-deferred and so do annuities. By putting a portion of your savings into an annuity, instead of a bank savings account or CD, you’ll get the same tax benefits as you would in a retirement account. Plus, you don’t have to worry about IRS yearly maximums when you invest.
At Anderson Retirement Solutions, we provide solutions that help prepare you and your family for a financially secure future. Please don’t hesitate to contact us at 888.473.6931 to learn more about how a guaranteed income annuity could further your retirement savings strategy.