Consistent, predictable income guaranteed for as long as you live.
There was a time when most retirements were fully funded by guaranteed income from Social Security and employer pensions. Those days are long gone. Today, most retirees fund a large portion of their living expenses with their own savings and investments.
Unfortunately, distributions from IRAs and 401(k) plans aren’t often guaranteed. Compounding the problem, retirees are now living longer than ever. Advancements in medicine, nutrition, and technology have made it possible for many retirees to live into their 80s, 90s, and beyond.
A long lifespan and non-guaranteed retirement income can make for a dangerous combination. There’s a very real risk that you could outlive your savings, especially if you have to use a substantial amount of your assets to pay for medical costs and long-term care.
An immediate annuity could be an innovative way to address this risk. Immediate annuities allow you to convert a portion of your assets into a predictable, guaranteed stream of income that lasts as long as you live. Guaranteed lifetime income can take some of the uncertainty out of your retirement, allowing you to fully enjoy your golden years.
Not sure if an immediate annuity is right for you? Below are a few more details on immediate annuities, how they work, and why it could be the right strategy for you.
The primary benefit of an immediate annuity is the stream of guaranteed lifetime income. This income begins as soon as you open the annuity contract. You contribute a lump sum amount, which the insurance company then converts into an income stream.
The income amount is based on several factors. One is the amount of your contribution. Obviously, the higher your contribution amount, the greater your income is likely to be.
Another important factor is the amount of time the income will last. Generally, the longer the income is expected to be paid, the lower each payment will be. If you are seeking lifetime income, there’s no way for the insurance to know with certainty how long you will live. However, the company will use an actuarial table to make an estimate based on your age. The older you are, the shorter your life expectancy is likely to be, meaning your payment will likely be higher than if you had purchased the contract at a younger age.
Most people who purchase immediate annuities do so for the purpose of creating lifetime income. However, that’s not the only option available. There are a wide range of different payment durations available:
Lifetime. As the name suggests, lifetime payments last as long as you live, even if you life well past age 100. A lifetime income amount is based largely on your age at the time you open the policy.
Period Certain. Under this option, you receive payments for a certain period of time rather than for life. For example, you may choose payments for 10 or 20 years. Even if you pass away within this timeframe, the payment continues to your beneficiaries. The payments stop at the end of the period certain, regardless of whether you are still alive. In this case, the payment is based on the length of the period, not your age.
Life with period certain. This is an innovative way to create lifetime income, but also protect your beneficiaries. You can add a contingent period certain, like 10 years, onto your lifetime income annuity. If you pass away within the period certain, your beneficiaries receive payments for the remainder of the period. If you live beyond the period, you still continue to receive income for life.
Joint lifetime. Perhaps you want to create income for you and your spouse, no matter who lives longest. You can do that with a joint immediate annuity. The income is guaranteed to continue for both your lives, and the payment amount is based on both of your life expectancies. Some policies allow for a reduction in income after the first death.
Some immediate annuities offer more than simply income. You may be able to choose from additional features and benefits to enhance your protection. Here are two common features to consider:
Increasing Income. Inflation is easy to overlook as you plan your retirement, but it’s too important to ignore. Inflation is the gradual increase in prices for goods and services. From year to year, inflation might be modest. Over the long-term, however, it can have a big impact.
You can protect yourself from inflation by increasing your retirement income every year. Some annuity companies offer immediate annuities that increase your income on an annual basis. That could help you manage inflation and maintain your standard of living.
Death Benefit. As important as income may be, you might also want to leave a legacy for your children, grandchildren, and other loved ones. Some immediate annuities allow you to attach a death benefit. Your income amount could be reduced. However, your beneficiaries receive a portion of your contribution back as a death benefit after you pass away.
Long-Term Care Protection. Liquidity is a common concern surrounding immediate annuities. Even if you want guaranteed income, you might want the ability to access your contribution amount in the event of an emergency. Some policies allow you to take one-time lump sum withdrawals to fund things like long-term care or terminal illness treatment. The withdrawal impacts your income payment, but it could be a helpful solution during an emergency.
Ready to explore your immediate annuity options? Let’s talk about your goals and needs and determine what strategy is right for you. Contact us today at America’s Annuity and let’s start the conversation.