Stan The Annuity Man Haithcock often shares interesting facts about the origins of annuities. In one of his latest Marketwatch articles, “The best way to get your ‘salt money’ after retiring,” he shared the origin of the word ‘salary’. Just like the Ancient Romans introduced the first annuity products, they also first used the word salary, or in Latin ‘salarium’. It literally means “salt money” because Roman soldiers were partially paid in salt, a necessary product to help preserve food before refrigeration. These same Roman soldiers were also paid the first annuity pensions, which guaranteed them lifetime income for their lifetime service to the empire.
As you plan for your own retirement, you have to determine what portion of your savings you will use for your ‘salt money’. This will be the money that you create a retirement salary with, often using an annuity to create lifetime income. Annuities are the only products that solve the issue of longevity risk and pay you a retirement salary that will last as long as you live. That is, unless you are lucky enough to have a company pension like those Roman soldiers did way back when. If you don’t have a pension or your pension won’t cover your living expenses, you should consider an annuity for your retirement income needs. Annuity products can solve for two needs: income now or income later. The ‘salt money’ that you use to purchase an annuity can be used to purchase an annuity whose contractual guarantees meet your personal retirement planning needs.
If you are ready to retire and need income now, you can purchase a single premium immediate annuity (SPIA) or a charitable gift annuity that will start paying your income in as soon as 30 days from purchase. For people who aren’t yet ready to retire or don’t need the income until later in retirement, a deferred income annuity (DIA) or an income rider should be considered. These products can start paying you income anywhere from 13 months to 45 years after purchase.
Most people purchase annuity products to buy income, either for the present or for the future. Annuities can also offer principal protection, long term care benefits, death benefits and more, depending on the product’s features. Stan The Annuity Man believes that annuities are best used for their lifetime income and transfer of risk benefits. Your risk of running out of money during your lifetime is transferred to an insurance company. You can create a guaranteed income floor using Social Security, pension income (if you have it) and annuity income. This allows you the freedom to invest your other money in the markets if you would like to take on more risk. You don’t have to worry about whether or not you will have income in the future if you have purchased an annuity product to guarantee you a lifetime income stream.
Written by Rachel Summit