What is a
Guaranteed Lifetime Income Annuity?
A guaranteed* lifetime income annuity can provide you with some great benefits in retirement. Retirement has changed in America. People are living longer, and pensions are rare. Now add on market volatility, and the questions surrounding social security benefits. It’s really no wonder people are feeling stressed out about saving for retirement. There’s a strategy you can use, however, to give yourself a regular flow of guaranteed income in retirement.
A guaranteed lifetime income annuity is a contract with an insurance company. This contract allows you to transform part of your retirement savings into a lifetime of predetermined regular payments. First, you place funds into the annuity. An insurance company then has a contract with you. At this point, the fixed indexed annuity (or FIA) converts the value into set payments that happen over a period of time. You can usually set payments to begin once you reach 60 years old. If you delay your withdrawals, though, the income payments are often larger.
A guaranteed lifetime income annuity can help protect you from the risk of outliving your retirement savings. No matter how long you live, you’ll have the reassurance of knowing you’ll always receive monthly payments. This guaranteed income will continue each month until you die. The payments associated with a guaranteed lifetime annuity payout eliminates any risk for retirees of outliving their retirement funds.
*Backed by the claims-paying ability of the carrier.
What is a Guaranteed Lifetime Income Annuity Payout?
With FIAs, you collect a series of payments. This happens over a set period of time. Some FIAs offer extra benefits. If you have an income rider, for instance, you could see payment totals increase. This is to help you keep up with inflation, and other cost increases.
Income riders do have some restrictions, of course. For example, taking money out before you reach the age of 59 1/2 can result in an additional 10% federal tax.
It’s important that you understand not only the benefits, but also the costs. Here at Turney Financial Group, LLC, we’d be happy to meet with you to answer any questions. Choosing the options that are right for you is the key to your future retirement.
Choices for You to Make
The accrual period usually lasts between 5 and 10 years. Once this period is over the distribution phase begins and you can begin receiving guaranteed income. If you follow the terms of your contract, no surrender charge is applied. Your annuity contract’s interest credit is also protected. It is possible, however, for you to choose a longer period. This could potentially increase your interest rate. Our team here at Turney Financial Group, LLC is here to help you review your options. You can join us at our seminars and client meetings. We can help you understand all the details so you can make an informed decision.
There are two main choices for the timeline in which you receive your payments. The first is annuitization payments. If you choose this, you’ll receive your income annually. Additionally, annuitization payments can be partially tax-free. Some of the income may be refunded for what you paid for the annuity. The other part may be taxable, because of the interest that you’ve earned. The second option is income withdrawals. This means that withdrawals under the annuity are fully taxable until the interest you’ve earned is taxed. Then you withdraw what you paid for the annuity, tax-deferred. It’s always a good idea to speak with your tax advisor, of course, before making a choice.
You can control how much money you receive in retirement with an FIA. During the accumulation stage, your money will grow. Once you’ve passed the waiting period, you can start to receive payments. Your contract will go over the details of the payment schedule set up. You should work with a qualified insurance advisor to see if a guaranteed lifetime income annuity and its benefits are the right fit for you.
Protection For More Than Just Life
If you happen to pass away before you start to receive your scheduled annuity benefits, your beneficiaries will receive a death benefit. In some cases, even if you pass away after you’ve started to receive payments, your beneficiaries may still receive a death benefit. Your beneficiaries can receive this money as one lump sum, or in payments. Even retirees who have no plans to access their income from their annuity can choose a fixed index product.
Money For When You Need It Most
The benefit of choice is one of the top reasons why retirees choose a guaranteed lifetime income annuity. You aren’t at risk when the market dips, instead, the insurance company is. FIAs also offer ways to ensure your future. Your beneficiary or beneficiaries can even collect your annuity assets without going through probate. Reach out to our team here at Turney Financial Group, LLC, to see if a guaranteed lifetime income annuity is the most suitable option for you.