Ready, Set, Retire!

Retirement is considered by many Americans as a time to realize their dreams or experience some well-deserved leisure. For others it is the opportunity to embark on a new career. How you live out your retirement will largely be determined by your ability to sustain the lifestyle you desire. And your success will depend in part on how well you have planned for your future. Sound daunting? It doesn’t have to be, if you develop a sound financial strategy.

Annuities, particularly fixed annuities, are investment vehicles that span well across all income groups. Regardless of your income or net worth, having a fixed annuity as part of your product portfolio might be a wise choice.

As a long-term investment vehicle, a fixed annuity will give you a tool you need to pursue your retirement goals: the potential to accumulate assets while deferring taxes on earnings; financial protection for your beneficiaries; and a choice of annuity payout options you can depend on.

Together with your IRAs and 401(k) plans, fixed annuities can help put you on a path toward realizing your retirement goals. Consider the following hypothetical scenarios:

Carlos, a high net worth individual, might make good use of a fixed annuity’s tax-deferred growth. Carlos can delay distributions from his annuity when he doesn’t need the monthly retirement income (unlike distributions from many qualified retirement plans). Also, if Carlos carefully selects his beneficiaries, he can expand the value of his annuity.

Elizabeth, a middle-income individual, has several financial assets and still might need to supplement her monthly retirement income. Elizabeth might also need to qualify for government benefits someday and might have difficulty qualifying due to her financial assets. By purchasing an annuity, she might be able to reduce her financial assets enough to qualify for government benefits, while also supplementing her monthly income. (You should know that regulations vary significantly from state-to-state, so it is very important to consult experts, including elder law attorneys, prior to using this technique.)

Paul, a lower-income consumer, needs a source of retirement income that will provide a consistent monthly income. A fixed annuity might be ideal for his purpose. Structured properly, a fixed annuity can provide guaranteed retirement income payments for life, eliminating at least some concern about having enough money to live on during retirement.

A fixed annuity can be a valuable part of your retirement planning, regardless of your financial status. In addition to offering some tax benefit, annuities provide flexible options for both growth and income. In fact, annuities are a major source of income for many consumers who are over age 65*, regardless of whether they are fully retired or working part-time. These consumers receive a monthly income to live on while their investment grows tax-deferred, and their earnings are taxed only when the money is paid to the annuity owner or the beneficiary.

Unlike other investment vehicles, an annuity can provide monthly income for the life of the annuity owner or for the life of both the owner and survivor, typically the owner’s spouse.

Regardless of your financial situation, owning a fixed annuity might be a good investment vehicle to include in your financial portfolio. Together with your other investments, such as IRAs or 401(k) plans, fixed annuities can help redefine your retirement.


* Society of Certified Senior Advisors, 2006 data.

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Volume 4, Issue 19, Posted 2:06 PM, 09.05.2008