Should you consider purchasing a fixed annuity?
We hear it often — Americans are living longer and healthier lives and the population of retired people is about to explode thanks to aging Baby Boomers. The question then becomes: Will my retirement income be enough? Fixed annuities may help address that concern.
Deferred or immediate?
There are two basic types of fixed annuities: deferred or immediate. A deferred annuity allows you to accumulate money over time on a tax-deferred basis, and then allows a choice of several payout options you can take advantage of during your retirement years. Immediate income annuities allow you to use a one-time contribution to immediately produce a regular income stream. Which type may be appropriate for you depends on your individual circumstances, such as how many years until you retire and the like.
- Tax-deferred growth. The earnings on your annuity will not be taxed until they are withdrawn.* That means funds that might ordinarily go to pay taxes may instead accumulate earnings. Over time, tax deferral has the potential to make a significant difference in your accumulation.
- Competitive current interest rate. Current interest rates are generally competitive when compared with other fixed-interest vehicles such as money market funds and CDs.
- Lifetime income option. When you are ready to annuitize, you can choose from several payout options, ranging from a single lump-sum payout to periodic payments over a specific time period to a guaranteed income for life. For those who anticipate a lengthy retirement, lifetime income may be an attractive choice. Remember, it could be many years before you “take delivery” of your annuity income, so be sure you are depending on a financially strong and well-managed company like Farmers. Call me and I’ll provide you with current information on the strength and stability of Farmers.
- Death benefit. If you die before the annuity payout begins, your beneficiaries will receive the contributions paid in, plus any accumulated earnings.
- No contributions limits. Contributions to many retirement savings vehicles, such as 401(k) plans and IRAs, are limited by the Internal Revenue Service. Annuities, however, offer flexibility and allow you to contribute as much as you want, up to the limits imposed by the insurer.
If you’re looking for strategies that may help grow your assets, you might want to consider a fixed deferred annuity. Call me and I can provide you with the information that may help you make an informed decision.
*Generally, surrender charges apply if withdrawals are made in the early years of the policy. Withdrawals generally are subject to ordinary income taxes, and withdrawals prior to age 59½ may be subject to a 10 percent federal tax penalty. This document is for informational purposes only. You should consult your attorney, accountant or tax adviser for legal or tax advice.
As we know, Americans are living longer than ever. A single-premium immediate annuity, also known as an income annuity, may help provide an income stream that you won’t outlive. An income annuity converts a portion of your retirement savings into a regular stream of retirement income. In exchange for your one-time contribution, the issuing insurance company guarantees that it will pay you (or you and your spouse) a stream of income payments, typically monthly, for a specified period of time. These guarantees are subject to the claims-paying ability of the issuing insurance company.
Cost of doing business
Fees and expenses generally cover the insurance company’s administrative expenses, the cost of offering the guarantees and the like, and are typically factored into the current interest rate. Call me for more information on fees and expenses.
If you are interested in reducing the possibility of outliving your assets, you may wish to consider an immediate annuity. Call me and I can provide you with the information that can help you make an informed decision.
This document is for informational purposes only. You should consult your attorney, accountant or tax adviser for legal or tax advice.
Life insurance and annuities issued by Farmers New World Life Insurance Company, Mercer Island, WA 98040