Annuity & Retirement

What Is an Annuity?

An annuity is a financial product designed to provide you with a steady stream of income—most commonly in retirement. Issued by insurance companies, annuities help you grow your savings with tax advantages and then convert them into predictable income for life or a set period.

Whether you're looking to protect your principal, grow your retirement funds, or make sure you never run out of income in retirement, annuities are built to give you peace of mind.

Why Annuities Matter for Retirement

When you retire, one of the biggest questions becomes: How long will my money last? Annuities offer an answer to that concern.

With the right annuity strategy, you can:

✅ Lock in guaranteed income for life
✅ Enjoy tax-deferred growth while your funds accumulate
✅ Shield your savings from stock market losses (depending on the annuity type)
✅ Choose how and when you want to receive payments
✅ Leave a legacy with built-in death benefit options

How Does an Annuity Work?

An annuity has two main phases:

1. Accumulation Phase

This is where your money grows. You can fund the annuity with a single lump sum or with regular contributions. Your funds then grow tax-deferred, meaning you won’t pay taxes until you withdraw.

Depending on the type you choose, your growth could be:

• Fixed – You earn a guaranteed interest rate
• Indexed – Your returns are linked to a market index like the S&P 500, with downside protection
• Variable – You can invest in market-based funds for potentially higher returns (with more risk)

2. Distribution Phase

This is when you start receiving payouts. You can choose:

• Lifetime income – Payments continue for as long as you live
• Fixed-period payments – Income lasts for a set number of years
• Lump sum – You take all the money out at once (note: taxes may apply)

Types of Annuities

Choosing the right annuity depends on your goals. Here’s a quick overview of your options:

🔒 Fixed Annuities

‍Provide steady, guaranteed interest. Great for conservative savers who want stability.

📈 Indexed Annuities

‍Tied to the performance of a stock market index. You benefit from market gains (up to a cap), but you're protected from losses with a 0% floor.

📊 Variable Annuities

‍Offer higher growth potential with market-based investments. Ideal for long-term investors comfortable with more risk.

⏱ Immediate Annuities

‍Start paying income almost right away. Best for those already in or near retirement.

📆 Deferred Annuities

‍Let your money grow for a while before you start taking income. Great for long-term retirement planning.

‍

Tax Considerations

• Tax-Deferred Growth: You don’t owe taxes on gains until you take distributions.
• Qualified Annuities: Funded with pre-tax money (like a 401(k) rollover). Taxed as income when withdrawn.
• Non-Qualified Annuities: Funded with after-tax dollars. Only the earnings portion of withdrawals is taxable.
• Early Withdrawals: May be subject to a 10% IRS penalty if taken before age 59½.

Legacy Planning & Death Benefits

Some annuities offer built-in or optional death benefits so your remaining balance can be passed on to a beneficiary. Others allow for enhanced legacy options like guaranteed minimum payouts or income continuation for a spouse or child.

➡️ Note: If you select a “life-only” payout option, any remaining funds may go back to the insurance company unless you include a beneficiary rider.

Final Thought: Why Annuities Belong in Your Retirement Strategy

Annuities give you something most investment accounts don’t: guaranteed income for life.

They can serve as a powerful piece of your retirement plan, complementing Social Security, pensions, or 401(k)s. Whether you’re looking for peace of mind, protection from market downturns, or a reliable way to generate income that lasts as long as you do—annuities deserve serious consideration.

Curious if an annuity is right for you?

Let’s explore the options together. We'll help you build a retirement strategy that aligns with your goals and gives you the security you deserve. Reach out for a no-pressure consultation.

‍

‍