Annuities – A Valuable Tool for Retirement Planning

Annuity advice to prevent you from outliving your assets

Most people carry fire, health and car insurance, but these products do not protect you against the most serious risk you face in retirement: Living longer than your assets.

Purchasing an annuity can be a great way to guarantee your retirement income for as long as you live as well as protect your assets from inflation, stock market fluctuations, a serious medical crisis or other unforeseen circumstances. An annuity can help bolster your retirement financial plan by guaranteeing your retirement income.

An annuity is like a pension you buy for yourself -- you purchase (with a lump sum of money or payments over time) monthly income for a specified period of time or for the rest of your life – no matter how long you live.

The good, the bad and the confusing

The good news: Annuity products can be structured to strengthen your retirement financial plan. In many cases, the best type of annuity for retirement is a fixed lifetime annuity with an annual Cost of Living Adjustment that protects your income from the affects of inflation. A fixed lifetime annuity gives you an income stream for the rest of your life – no matter how long you live and it offers a guaranteed payment – regardless of stock market performance.

The bad news: Annuity products can provide exactly what most retirees need – guaranteed income. But, there are downsides to an annuity. For example, it locks up your capital, so you lose flexibility. With an annuity you are trading flexibility for guaranteed income.

The confusing: Not all annuities are created equal and many annuity products and features are actually a bad bet for retirees – or anyone. In addition to choosing between a fixed (the mostly good) or variable (risky) annuity, there is also the matter of deciding where to purchase your annuity and which options to include on your annuity contract. These options can be incredibly confusing.

Continue reading below to learn more about your options, or let us refer you to a prescreened annuity provider to help you find the annuity product that is right for you and your family.