![]() ![]() In addition to choosing when you’ll start receiving annuity payments, you’ll also need to decide how long those payments will last. fixed period: How long will you keep getting annuity payments? Keep in mind, if you take any money out of your deferred annuity before age 59 1/2, you’ll get hit with a 10% early withdrawal penalty on top of the income taxes you’ll owe! 4 And we haven’t even touched on annuity fees yet. You can choose whether your annuity pays you right away (immediate annuity) or at some point in the future (deferred annuity). deferred: When do you want to start getting payments? And the money you put in grows tax-deferred-which means you only pay taxes on that money when you start getting your payments in retirement. This period when you’re contributing money is called the accumulation phase. Or you can pay for the annuity with a series of payments over many years. If you have a big pile of money-maybe through years of saving or an inheritance-you can pay for an annuity in one big payment. multiple premiums: How do you want to pay for the annuity? Here are the different ways you can put an annuity together. The annuitant (you) can create an annuity based on your preferences and your own personal situation, minus the chips and guac. Putting an annuity together is a lot like ordering a burrito at Chipotle, just not as tasty. In reality, annuities are super complicated and come in several different shapes and sizes. That’s the simple version of what an annuity does. You’re paying an insurance company to take on the risk of you running out of money. But when you boil it down, annuities are an insurance product. Insurance companies sell a lot of annuities by playing on people’s fear of outliving their retirement savings. 2 That might explain why more than half of workers would be very interested in an annuity if it was offered through their employer’s retirement plan. Only 29% of Americans say they’re very confident they’ll have enough money to live comfortably throughout their retirement years. 1 Why is that? Well, with uncertainty swirling around the economy, Social (In)Security and pension plans drying up, many people are looking for stable income streams for their retirement. In fact, they’re predicted to sell up to $288 billion in 2022. Spoiler alert! In most cases-the answer to that last question is no.īut despite that, annuities are more popular than ever. ![]() Let’s take a closer look at what annuities are, how they work, and whether they should be part of your retirement savings strategy. But are annuities really the best way to secure a stress-free retirement? The ultimate goal of an annuity is to give you a steady stream of income throughout your retirement, which sounds great at first. Market chaos, inflation, your future-work with a pro to navigate this stuff. Annuities are often marketed as financial products (like stocks, bonds, etc.). In return, they promise to grow your money and send you payments during retirement. You make a payment (or payments) to the insurance company. It’s designed to provide a guaranteed income for the rest of your life.
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