Fixed Income Annuities- ‘Creating your own Pension Plan’

In year’s past, it was very common for private companies to offer a pension plan as part of their employee benefit package. Many retirees today enjoy pensions they earned while working at large companies such as Ford and General Electric. But times have changed. While some companies do offer these same benefits, they are becoming few and far between with most companies opting to offer only some type of match (sometimes) towards a 401K retirement plan. The same goes for certain government entities and non-profits by offering something similiar called a 403B plan.

The result is that most folks in the years to come will have to fend for themselves and come up with their own gameplan for retirement income. This becomes more complicated with the fact that people are living longer than they used to, due to advances in medicine to not only cure disease, but extend life for people with chronic illnesses.

Enter income annuities. Income annuities are a gamechanger because they are the only financial instrument today that can offer a guaranteed income to retirees for their entire lives. Think of it as the ‘Create your Own Pension’ plan. Income annuities give consumers peace of mind, taking away the fear that they will outlive their retirement savings. If you reach age 65, you have a 50/50 chance of living to age 90, based on recent statistics. A baby born today has a 100 year life expectancy!

There are deferred and immediate income annuity options. The best choice depends on your age and needs. Think of immediate income annuities like life insurance in reverse. You pay an upfront premium (lump sum) and receive payments (plus interest) for the rest of your life. Deferred income annuities grow over a period of time tax deferred, with your annual lifetime payments rising each year you wait to start taking payments. There are many great features and benefits of income annuities to fit each retiree’s particular needs.

Another great benefit of income annuities is that regardless of stock market swings, your money is safe inside the annuity. This is because the money is not actually tied to the stock market; these are contracts between you and the insurance/annuity company. This becomes very important when you are getting closer to retirement, have a huge 401K nest egg, and are holding your breath that the stock market doesn’t take a plunge. The income annuity allows for consumers to protect a portion of their overall retirement savings from loss in the stock market. The only real downside to this is the annuity only gaining 5-7% annually, as opposed to 10-11% (what the stock market has historically made over time).Additionally, there can be high surrender charges if the consumer needs to pull all of their money out. Remember, this is a retirement vehicle and is designed for long term benefits, not short term.

If you are looking to diversify a part of your portfolio and create a guaranteed income for life, income annuities could be a good fit for you. There are many different types of plans and flexible options and so please don’t hesitate to contact us with any questions. Have a great day!