Managing and Mitigating Risks with Annuities

Saving enough money is an important aspect of preparing for retirement and meeting your financial goals, but having a guaranteed income is equally crucial. Confidence in retirement comes from knowing that you’ll have a steady stream of income to cover your expenses and maintain your desired lifestyle.

Here are some of the reasons why guaranteed income is essential for a confident retirement:

1. Financial Security: Guaranteed income provides a safety net, ensuring that you have a reliable source of funds throughout your retirement years. It can help cover essential expenses such as housing, healthcare, food, and utilities, which reduces the risk of running out of money.

2. Financial Independence: With a guaranteed income, you can have financial independence knowing you have consistent cash flow regardless of market fluctuations or economic downturns. This stability allows you to focus on enjoying your retirement rather than worrying about financial uncertainties.

3. Longevity Protection: People are living longer, and retirement can potentially span several decades. Having a guaranteed income, such as a pension or annuity, can protect against the risk of outliving your savings. This ensures that you’ll have income for as long as you need it, regardless of how long you live.

4. Lifestyle Maintenance: Retirement is a time to enjoy the activities and experiences you have always wanted. Guaranteed income allows you to maintain your desired lifestyle and pursue your passions without constantly worrying about financial constraints.

Guaranteed income in retirement can come from the following sources:

1. Social Security: Social Security provides A guaranteed income stream for eligible individuals. The amount you receive depends on factors like your work history and when you choose to start receiving benefits.

2. Pensions: If you are fortunate enough to have a pension through your employer, it can provide reliable income during retirement. Pensions typically pay a set amount each month based on your years of service and salary.

3. Annuities: Annuities are financial products that provide regular payments over a specified period or for the rest of your life. They can be purchased from insurance companies, and there are various types including:

• Immediate Annuities
• Deferred Annuities
  • Fixed Annuities
  • Deferred Income Annuities
  • Fixed Index Annuities
  • Variable Annuities
  • Index Variable Annuities

Fixed and Variable annuities are suitable for long-term investing, such as retirement investing.  Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply.  Variable annuities are subject to market risk and may lose value.

Fixed Indexed Annuities (FIA) are not suitable for all investors. FIAs permit investors to participate in only a stated percentage of an increase in an index (participation rate) and may impose a maximum annual account value percentage increase. FIAs typically do not allow for participation in dividends accumulated on the securities represented by the index. Annuities are long-term, tax-deferred investment vehicles designed for retirement purposes. Withdrawals prior to 59 ½ may result in an IRS penalty, and surrender charges may apply. Guarantees are based on the claims-paying ability of the issuing insurance company.

It is essential to assess your individual financial situation, consider your retirement goals, and consult with a financial advisor to determine the best strategies for creating a reliable stream of guaranteed income in retirement. Contact us today to see if an annuity is right for you.