Senior first benefits

How can a retirement annuity supplement my income in retirement? A retirement annuity can provide you with steady, guaranteed income during retirement — either for your lifetime or for a specific period of your choosing. A retirement annuity can be used in conjunction with Social Security and your retirement savings to create more diversified financial security in retirement.

What is a retirement annuity and how does it work? A retirement annuity is an insurance contract that allows you to set aside money to pay yourself an income in retirement. 

The income is paid out on a schedule — usually monthly, quarterly, or annually — giving you the peace of mind that you have a steady income stream to rely upon during your golden years.

The money you use to purchase a retirement annuity is called the premium. You typically purchase a retirement annuity years before retirement and pay the premium either with a lump-sum payment or with a series of payments over time.

What are the primary types of retirement annuities? There are three basic types, which include: 

• Fixed annuity: With this type, the insurance company guarantees that you will earn a minimum rate of interest during the accumulation phase of the annuity. Plus, it guarantees that the periodic payments will be a set amount. These periodic payments may last for a definite period, such as 20 years, or an indefinite period, such as your lifetime or the lifetime of you and your  spouse. Fixed annuities are not securities and are not regulated by the Securities and Exchange Commission (“SEC”).
• Variable annuity: This type of annuity provides the purchaser more choice as to where their premium goes through a selection of sub-accounts, similar to mutual funds. The rate of return on your purchase payments, and the amount of the periodic payments you will eventually receive, vary depending on the performance of the sub-accounts you selected. Variable annuities are securities regulated by the SEC.
• Equity-indexed annuity is a "hybrid" type of annuity. During the accumulation period – when you make either a lump sum payment or a series of payments – the insurance company credits you with a return that is based on changes in an equity index, such as the S&P 500 Composite Stock Price Index. The      insurance company typically guarantees a minimum return. After the accumulation period, the insurance company will make periodic payments to you under the terms of your contract, unless you choose to receive a lump sum. Depending on the mix of features, an equity-indexed annuity may or may not be a security. The typical equity-indexed annuity is not registered with the SEC.

What are questions to ask if you are considering purchasing a retirement annuity? If you are considering purchasing an annuity, it is important to know:

• The rating of the insurance company (indicating their financial strength) issuing the annuity, particularly in the case of a fixed annuity.
• The fees you will pay.
• That if you are not yet 59½ years of age and considering a withdrawal, you may be subject to taxes and a 10% federal penalty if the funds are qualified. 

Have questions? Give me a call. I am happy to help!