Annuity Income Planning

Annuities for Retirement Income

When we think about retirement income, certain sources of income come to mind. Social Security, pension (if your lucky), IRA distributions, 401k distributions, rental property etc. The problems with all of these sources, with the exception of Social Security and possibly your pension, your income has no guarantee that you won’t outlive it. Now that’s a scary thought.

#1 49% of retired Americans fear outliving their money.

#2 Maintaining their current lifestyle and spending level.

#3 Rising health care cost.

These fears are earlier in the retirement years. Later on, say 10 years or more into retirement, concerns shift.

#1 44% Say serious illness, including dementia and diminished capacity.

#2 Big losses with retirement investments.

#3 Concerns over moving out of home to go to assisted living or nursing home.

The concerns the people in the study were asked about may not all be possible to avoid. But what if the financial concern for some of those can be lifted (weight off the shoulders)?

Securing Retirement Income Through Annuities

Annuities by their very nature are income vehicles. That’s what they were originally designed for and they are still working that way today.

Annuity types that can fit an immediate income need:

SPIA Single Premium Deferred Annuity

This type of annuity is designed to give you income based on your life expectancy. The older you are the higher the income returned to you. These are irrevocable and can’t be unwound once purchased. Generally they have the highest income although recently I’ve seen income riders pay greater income.

DIA Deffered Income Annuity

If you have a target time to start Income at some point in the future this is the way to go. Your annuity grows in value until you elect income payments.

Annuity Income Riders

My personal favorite. Although not for everyone, if you’re at all like most people, you don’t have a crystal ball. Those that pretend to see their world unfold down the road, often don’t think about horrible markets, unexpected health care costs, inflation etc. That’s why an income rider is ideal. Why? Because we have no idea what the future holds. Maybe you intend to take income for live 5 years from now? But your brother passed away and left you as his heir. Now delaying that income further may benefit you.

This type of rider is optional and in most cases has a fee associated with it. The fee is a cost of insurance. After all, the annuity company is insuring that if you choose this rider and later elect income payments, you WILL NOT outlive your money. A joint income option may also protect your spouse.

Back to the concerns that retires face:

> Outliving money in retirement. Now that’s a problem that can be com ed with an annuity.

> Maintaining current lifestyle. Again, annuities to the rescue! If no value can be lost and you can count on a monthly check for life, then this is no longer a concern.

> Rising health care cost. An annuity with an inflation feature can guarantee your income increases year after year. Problem solved.

> Big losses of retirement investments. If you have an annuity that offers principal protection and locked in gains then big loses shouldn’t be a concern at all. At least on the portion in fixed annuities.

> Assisted living and or nursing care. Many annuities will give you a pay raise should one of these events occur. Some will even pay as much as 200% of your guaranteed income amount. So although annuities can’t solve the moving away from home issue. They may be able to help with much of the associated financial stresses that surround it.

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