In “Here’s What You Need to Know About Annuities,” Donna Fuscaldo of Fox Business says that annuities are an effective supplement to pay your basic expenses in retirement. You should definitely max out your retirement savings plan contributions and diversify your financial retirement strategy. Take into account any pension income or Social Security income first, then use some of your retirement savings to generate an income stream in retirement that will bridge the gap between the first two types of income. Many people overlook annuities because some unethical providers made a bad reputation for the products. But annuities are great retirement products and most of the providers out there are ethical. The people who should be looking into annuities are those who need a steady income stream in retirement and those looking for tax-deferred savings.
The Employee Benefit Research Institute found that half of Americans do not have a retirement plan sponsored by an employer. This is one of the reasons that annuities have been growing in popularity over the past few decades. Fixed and variable annuities are discussed in detail in the Fox Business article. Variable annuities invest your money in stocks and bonds and typically offer income to be withdrawn over your lifetime. Some variable annuities are changing those lifetime benefit guarantees, but many still offer them. Fixed annuities are similar to bank CDs. They guarantee you a lifetime stream of income, with a rate of return that is fixed when you purchase the product.
Many people turn to annuities for the tax deferred growth that they offer, especially people who do not have a 401k plan at work. Some people just want to save even more after maxing out their 401k and IRA tax-deferral accounts. All annuities are not the same, so you really have to do your research and find a product that meets your needs. It’s also crucial to purchase from a reputable insurance company. Scour the financial ratings of annuity providers so that your product is backed up when you are ready for your income stream to start. Annuities have fees and surrender charges, so know the prospectus attached to your annuity and ask an expert for help when you need it. The article says that the perfect time for buying an income annuity as part of a diversified retirement plan is right near or during retirement.
Written by Rachel Summit