The way annuities work may at first seem a bit complicated. That’s because these financial products can have many moving parts. But, by having a good understanding of the benefits, you could enhance the income you receive in retirement, as well as your tax-advantaged savings options during your working years.
Even if you aren’t sure what a retirement annuity is, this financial vehicle could make the difference between living a stress-free retirement or worrying day in and day out about whether you’ll run out of income when you still need it in the future.
Annuity income has become a hot topic, particularly over the past decade or so. One reason for this is because employer-sponsored defined benefit pension plans have all but disappeared. This has left many individuals to fend for themselves when it comes to a steady, reliable stream of income in retirement.
Indexed annuities have become very popular over the past decade or so – especially with those who are approaching retirement. That’s because an indexed annuity can provide you with market-linked growth, along with safety of principal – regardless of what’s happening with equities and interest rates.
A deferred annuity can help you to ensure that you don’t run out of income in the future. These annuities are designed for longer-term savings. So, unlike an immediate annuity that begins income payments within 12 months of purchase, deferred annuities allow you to grow your money tax-deferred, and then start taking an income stream down the road.
Over the past decade or so, the fixed annuity has become a key component of retirement income planning. Because people (on average) are living longer lives today, one of the biggest fears on the minds of retirees – as well as those who are preparing for retirement – is running out of income while it is still needed.
If you’re looking for a way to add to your tax-advantaged investments – even if you have “maxed out” other qualified savings options like a traditional IRA and 401(k) – a variable annuity could be a good solution for you.