Every individual planning for retirement has his or her own unique set of goals and concerns for their post-retirement income. That’s why retirement planning is such a complex topic. One of the most flexible, low-risk products to consider adding to a retirement strategy is a Fixed Index Annuity.
Annuities are policies issued by insurers that guarantee certain benefits, payments, and interest in exchange for the premium payment. There are many different types of annuities, including the fixed annuity which offers a set interest rate for a set period of time and the fixed index annuity which has both a fixed rate and the opportunity to see more gains which are linked to a chosen, outside index.
Annuities can be immediate or deferred, meaning that the payout can begin relatively quickly or years down the line. The annual interest earned in annuities is generally not taxable as long as it is not distributed, which allows for even more powerful tax-deferred accumulation.
These are powerful policies that you should consider for your retirement strategy. If you aren’t certain whether they’re a good fit for you, here are five reasons why it’s worth your time to find out.
1. Some Annuities offer built-in guarantees*: These policies offer many different guarantees that other products don’t. For example, you can build a guaranteed minimum income benefit into a fixed indexed annuity that allows for a set annual distribution. Other guarantees can include death benefits paid to heirs and guaranteed interest growth.**
2. Some Annuities can offer protection against inflation: Inflation is a very real concern for retirees whose savings are limited and can be impacted by the rising cost of goods. Inflation protection riders on products like the index annuity help ensure that your retirement income rises in tandem with increases in the consumer price index without requiring more of your principal.**
3. Some Annuities create predictability: There once was a time when most retirees relied on their employer pension to meet all their retirement income needs. In today’s financial landscape, employer pensions and other defined-benefit plans are rarely offered by employers. According to the National Institute on Retirement Security***, only 33 percent of private sector employees had pensions in 2005–compared to 88 percent in 1975. Annuities can offer a predictable post-retirement income stream.
4. Annuities provide great flexibility: Annuities can be purchased inside a traditional or Roth IRA, or they can be purchased on a non-qualified basis outside of a qualified retirement account.
5. Fixed Index Annuities can be paid out in a lump sum after the surrender period or you can choose from, different options for annuitization such as period certain payouts, joint and last survivor, and income for life, depending on the policy you choose. The policy can be designed with a guaranteed income rider that can be triggered any time after a set date.**
