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How much of your savings should you put in an annuity?

How much of your savings should you put in an annuity?

While most retirees hope to maximize their incoming cash flow in the future, how much of your savings should you put in an annuity – a vehicle that can provide you with a secure, ongoing retirement income for life?

The answer to that is, it depends.

Because there is no such thing as a one-size-fits-all annuity, the amount of money that is right for you can be dependent on a long list of factors, including:

  • The age you plan to retire
  • The amount of income you need (and want)
  • When you will need the income
  • Other financial goals, such as tax-deferred build-up of your money

Many financial experts agree, though, that you should ideally have enough annuity-generated income to at least cover your living expenses. In other words, enough to replace your former paycheck.

Plus, if you plan to travel or have other non-essential expenses, you may also want to secure an additional income stream for these “wants” (as versus needs). This can provide you with a great deal of certainty…even in an uncertain financial environment.

Other Important Factors to Consider When Purchasing the Right Annuity for You

On top of “paycheck replacement,” there are some other factors that you need to consider, too, before you commit to an annuity. For example, if you are in poor health, an annuity may not be the best option for you. These financial vehicles are priced for those with “good genes.” So, you may find other alternatives that could suit your needs better in this case.

In addition, the “health” of the insurance carrier is also a key component of what to consider when purchasing an annuity. In this case, gravitate towards insurers that have a good, long track record of financial health and stability. You can narrow these down by checking the ratings from A.M. Best, Standard & Poor’s, Moody’s, and/or Fitch.

There are also many different types of annuities to choose from. Some of these will provide you with the opportunity to grow your money tax-deferred through underlying investments, while others will give you a guaranteed (albeit, lower) return and keep your money safe, regardless of what happens in the market.

Other types of annuities will provide you with an immediate income stream in return for a lump-sum contribution, and still, others will also generate incoming cash flow for you, but the income stream won’t start until 30 or 40 years in the future.

Narrowing Down the Right Annuity for You

Discussing your needs with an annuity specialist can help you to determine which type of annuity – if any – is right for you, as well as how much you should commit to it in order to reach your specific goals.

At Annuity Gator, our primary focus is on educating consumers about annuities. This means that we provide information on “all things annuity” – including the good, the bad, and even the ugly. That’s because we know that this is the only way to make a truly well-informed decision.

If you’ve got questions about annuities, we’re here to help. Feel free to reach out to us via email through our secure online contact form. Or, if you’d prefer to call us directly at (888) 440-2468, you can chat with one of our annuity specialists now.

How much of your savings should you put in an annuity?

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