Lifetime Income Annuities

As you approach retirement, one of your understandable concerns is creating an income stream that will last through your retirement. No one wants to outlive their money and have to depend on others.

Regardless of your personal wealth, you have a specific lifestyle that you undoubtedly would like to continue as long as you live. You worked hard for that lifestyle. You deserve to retire the way you want to. The way you earned.

We have several strategies, including tax deferred investments that give you and your family a reliable continuous stream of retirement income, much like a pension.  We also focus on minimizing any tax burden so you can keep more of what you have invested as income as you transfer funds from a 401(K) or other investment accounts.

As people live longer into their retirement, and as Social Security’s future becomes less viable, ensuring that you have other strategies in place can ensure you have a happy stress free retirement.

One strategy that we recommend is to invest a portion of your retirement nest egg into a lifetime income annuity.  The amount invested should generate enough lifetime income such that the total amount of “guaranteed” income from Social Security, pensions and annuities will satisfy all of your basic living expenses. 

Please note that today nothing is guaranteed.  For example, some people believe that government pensions, e.g., Social Security, may not be around in the future.  Also, annuity income guarantees are subject to the claims-paying ability of the underwriting insurance company.  However, we conduct significant research on the financial stability of insurance companies before we recommended one.

Following is a brief description of various annuity types with comments.

Single Premium Immediate Annuity (SPIA)

This type of annuity is similar to Social Security or most corporate pensions. The income stream is guaranteed for life, but access to the principal is lost. We do not recommend this type of annuity except in very special circumstances. Let’s consider some alternatives.

Multi-Year Guarantee Annuity (MYGA)

This type of annuity is similar to a bank CD in which the interest rate is guaranteed for a specified period of time, For example, a 5 year MYGA might have a guaranteed interest rate of, say, 3.25% each year for 5 years. If you invest $500,000 in a five-year annuity @ 3.5%, you would expect to receive $17,500 per year and still have your principal intact at the end of the period.

Variable Annuity

Lifetime income with principal risk. A variable annuity is a type of annuity contract that allows for the accumulation of capital on a tax-deferred basis. As opposed to a fixed annuity that offers a guaranteed interest rate and a minimum payment at annuitization, variable annuities offer investors the opportunity to generate higher rates of returns by investing in equity and bond sub-accounts. 

Fixed Indexed Annuity (FIA)

Lifetime income with no principal risk. Indexed annuities offer annuitants the opportunity to earn higher yields based on stock market performance with protection against market declines. For most clients, we recommend the Fixed indexed Annuity (FIA).