8 Ways Annuities Can Help You Plan for Retirement

Keystone Financial Group |

Annuities can be mysterious. They can seem complex on the surface, and there are multiple different types of annuities, each with their own different features, drawbacks, and benefits. There is also a lot of confusing and misleading information out there about annuities, which could explain why you haven't yet added them to your portfolio!

But as we get closer to retirement age, and the average American lifespan continues to increase, now might be the perfect time to revisit the financial strategies in your retirement plan.

Consider these eight ways that annuities could help improve your retirement picture, and then consult with your financial professional and tax advisor to determine if an annuity may be a good addition to your portfolio.

  1. Social Security Maximization

Purchasing an immediate annuity can provide current retirement income while allowing you to delay claiming Social Security retirement benefits. This will maximize your partially inflation-adjusted monthly Social Security benefit payment, and increase your future payout amount. Your Social Security benefit amount will increase by 8% per year for every year that you delay claiming after your full retirement age, up until age 70.

  1. Tax-Deferred Accumulation

Use a deferred annuity for tax-deferred accumulation. Annuity earnings aren’t taxed until withdrawals happen or the buyer starts taking regular distributions.

  1. Fund Essential Living Expenses

You can purchase an income annuity or use the income options of a deferred annuity to help fund essential living expenses in retirement. This approach can free up other assets for investing in potentially higher-yielding or inflation-offsetting asset classes, without risking the income that you need to live on in retirement.

  1. Create Protected Income From Accumulated Assets

You may be able to transfer funds from a 401(k) or other qualified retirement savings plan to an annuity product to utilize the annuitization or optional income riders and turn accumulated funds into a protected, guaranteed income stream for retirement.

  1. Create a Bucket Approach Using Retirement Funds

We often use a Bucket Planning approach to help our clients plan for retirement. When it comes to annuities, you could opt to purchase income annuities for the Income-Now Bucket, a deferred fixed or variable annuity for Income-Later Bucket, and then set up a third bucket using the income options of a deferred fixed annuity to satisfy your required minimum distribution needs.

  1. Create a Lifetime Income Stream from An Old Life Insurance Policy

In some cases, you may be able to exchange the cash value of an unneeded permanent life insurance policy for an annuity product using a tax-free exchange.

  1. Supplement Your Retirement Income

You can use the annuitization and optional income riders of annuity products to create a protected flow of supplemental retirement income to solve your income gap if you won't have enough income from other sources.

  1. Income Planning for Small Businesses

If you own a business, you can use the income options of a deferred annuity to create a lifetime income stream for small, qualified plans by making the annuity an investment within the qualified plan. This is one way to create a private pension for yourself or your employees.

If these financial advantages, guaranteed income, or living benefits sound like something you would be interested in, give our financial professionals a call today at 614-300-9501 to set up a time to review your retirement plan and determine whether an annuity could be right for you.



Adapted from ThinkAdvisor.com



This document is for educational purposes only and should not be construed as legal or tax advice. One should consult a legal or tax professional regarding their own personal situation. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products offered by an insurance company. They do not refer in any way to securities or investment advisory products. Insurance policy applications are vetted through an underwriting process set forth by the issuing insurance company. Some applications may not be accepted based upon adverse underwriting results. Death benefit payouts are based upon the claims paying ability of the issuing insurance company. The firm providing this document is not affiliated with the Social Security Administration or any other government entity.