Income Now or Later

If you ask what is the single most important key to longevity, I would have to say it is avoiding worry, stress, and tension. And if you didn’t ask me, I’d still have to say it.¹ – George Burns

With the recent bouts of market volatility, it is normal for investors to worry about their retirement security and to wonder whether they could outlive the assets in their investment portfolios.

Fortunately, when it comes to retirement planning, there are more productive strategies than just worrying about the future. Immediate and deferred fixed annuities are insurance products that could help retirees safeguard some of their nest eggs and provide a steady income stream throughout retirement.

The type of annuity that may be appropriate for you depends on your personal circumstances.

Ready to Collect?

Immediate fixed annuities are typically purchased with a lump sum. The insurance company immediately begins making fixed monthly payments for a specific term, for life, or even for a lifetime plus the life of a spouse. The income amount is based on a number of factors, including the amount of the initial contract, the contract’s rate of return, and the number of years over which payments will be made. With a fixed annuity, the insurance company alone bears the investment risk.

Prefer to Wait

A deferred fixed annuity can be funded with either a lump sum or a series of payments. The contract begins paying a guaranteed income at a specific date in the future, and the payments reflect added value from any tax-deferred growth.

Annuities have contract limitations, fees, and expenses. The guarantees of fixed annuity contracts are contingent on the claims-paying ability of the issuing company. Most annuities have surrender charges that are assessed during the early years of the contract if the contract owner surrenders the annuity. Withdrawals prior to age 59½ may be subject to a 10% federal income tax penalty. The earnings portion of annuity payments is subject to ordinary income taxes.

Annuity income can be used to supplement normal sources of monthly income (e.g., Social Security and pension payments) so you will have sufficient funds to pay essential living expenses such as food, housing, and health care.

In fact, purchasing a fixed annuity with a lifetime payout may help substantially reduce your risk of running out of money. Now wouldn’t that be one less thing to worry about?

1) Brainyquote.com

This material was written and prepared by StoneRiver–Emerald.
© 2009 StoneRiver, Inc.