INCOME MATTERS – VOLUME 6
Special Retirement Planning Bulletin
Annuities: What You Need to Know
In this series, we’ve discussed the reasons that focusing on postretirement income is so important for savers. We’ve also talked about how to maximize Social Security—one of the important sources of income you can get. Now, let’s talk about how fixed indexed annuities can be the final tool to bridge the gap between a retiree and a comfortable life-long income.
Understanding the Fixed Indexed Annuity
Annuities are like pensions. They are contracts issued by insurance companies that guarantee annual payments for life. A Fixed indexed annuity (FIA) is a type of annuity that offers a powerful blend of growth and security. FIAs grow in value based on the performance of a selected stock index or indexes. That means you get to profit from rises in the market, which is crucial to ensuring that your savings last. But even better, FIAs have a mechanism within that locks in your gains from prior years and prevents losses during years when the markets are in decline. Some even offer a minimum interest rate that ensures growth even during years when your chosen indexes are losing value.
FIA Income
Adding a guaranteed income rider to your fixed indexed annuity allows you to begin taking a regular income from the annuity after a certain point in your contract. As with Social Security, the longer you wait to trigger this benefit, the higher the income is. Best of all, the income is guaranteed for life. This means you can easily budget out the rest of your retirement knowing exactly what to expect in income from Social Security and the annuity.
Added FIA Options
Many different types of seniors need the income that FIAs offer, and that means they may need a variety of other benefits as well— which is a need that FIAs can accommodate. FIAs can be designed to offer death benefits to heirs, enhanced income benefits to pay for long-term care expenses, and inflation protection.
FIA Security
One of the most comforting aspects of fixed indexed annuities is that they’re issued by insurance companies who must comply with aggressive requirements to keep funds in reserve in order to fulfill their financial obligations. For further protection, FIAs are covered by individual state guarantee associations (within limits) in the event an insurer goes bankrupt.
For many retirees, a fixed indexed annuity offers exactly the kind of security, income and peace of mind they need to relax and fully enjoy their retirement years.
I hope you enjoyed the INCOME MATTERS series. For more information about retirement planning that can help you, be sure to read about our retirement planning services or contact us for more information. For more retirement planning wisdom, check out our other Special Retirement Bulletin Series: