Retirement Planning & Annuities
Supplement your retirement funds & guarantee income for life with the right annuity.
Preparing for Retirement
As people age, they start to worry about their retirement plans and how they will support themselves financially. One option that senior citizens often consider is investing in annuities. Annuities are financial products that provide a steady stream of income during retirement. They are a popular choice because they offer guaranteed income, tax-deferred growth, and a fixed or variable interest rate.
Preparing for retirement requires a strategic financial plan that ensures that your assets grow to not only last your entire lifetime, but also to leave a legacy behind. You want to hold onto what you've saved and see your assets grow, but you don’t want to gamble with your retirement funds. Putting your money in the stock market has some risk, but there are ways to ensure that your assets never go down and lock in gains at each anniversary date.
What are Annuities?
Annuities are financial products offered by insurance companies that provide regular payments to an individual in exchange for a lump sum payment. Annuities are primarily used for retirement planning and are often considered a form of pension. They are designed to provide a steady stream of income for the rest of the annuitant's life.
THERE ARE THREE TYPES OF ANNUITIES:
Fixed annuities offer a guaranteed rate of return on the initial investment. The rate of return remains the same throughout the annuity's life. The amount of money that the annuitant receives is determined by the size of the initial investment, the interest rate, and the annuitant's life expectancy.
Variable annuities offer a fluctuating rate of return based on the performance of the investment portfolio. The annuitant assumes the investment risk, and the amount of money that they receive is determined by the performance of the underlying investments.
Indexed annuities offer higher returns based on the performance of a specific stock market index. They're a type of fixed annuity with a guaranteed minimum interest rate and a cap on the maximum rate of return. Indexed annuities offer higher returns without the risk of market losses, making them popular with seniors.
What are Benefits of Annuities?
Guaranteed income: Annuities provide a guaranteed stream of income for the rest of the annuitant's life, ensuring that they have a steady source of income even if they outlive their retirement savings.
Tax-deferred growth: Annuities grow tax-free until the annuitant starts receiving payments, which can help them accumulate more savings for retirement.
Protection against market volatility: Fixed and indexed annuities provide protection against market downturns, as the annuitant's rate of return is guaranteed, regardless of market performance.
No contribution limits: Unlike other retirement accounts, annuities have no contribution limits, which can be beneficial for seniors who have a significant amount of savings to invest.
How to choose the right Annuity
Choosing the right annuity can be a difficult decision, but the following steps can help seniors make an informed decision:
Identify your retirement goals: Determine your retirement goals and the amount of income you will need to achieve them.
Compare different types of annuities: Consider the benefits and drawbacks of each type of annuity, including fixed, variable, and indexed annuities.
Assess the financial stability of the insurance company: Research the financial stability of the insurance company to ensure that it can fulfill its obligations.
Review fees and charges: Review the fees and charges associated with each annuity, including surrender charges, mortality and expense fees, and administrative fees.
Consult with a Pivotal advisor: Seek the advice of a financial advisor to ensure that you make an informed decision based on your specific financial situation.
Considerations before investing in Annuities
A. Financial Stability of the Insurance Company:
Seniors should research the financial stability of the insurance company to ensure that it can fulfill its obligations. This can be done by reviewing the company's financial ratings and assessing its track record of paying out annuity payments.
B. Tax Implications:
Annuities have tax implications, and seniors should understand the tax consequences of investing in annuities. The tax treatment of annuities varies depending on the type of annuity, the annuitant's age, and the annuity's payout structure.
C. Fees and Charges:
Annuities come with fees and charges, which can vary depending on the insurance company and the type of annuity. Seniors should review these fees and charges carefully and ensure that they are comfortable with them before investing.
Annuities can be a valuable tool if you're looking to secure a steady stream of income during retirement. By understanding the different types of annuities, comparing the benefits and drawbacks of each, and considering the factors that can affect the annuity's performance, you can make an informed decision about which annuity is right for their retirement needs.
