Educational resources to help you sort through the complexities of annuities and investing.
Learn About Annuities
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So what are annuities and how do they work?
Annuities are designed to help your retirement plan succeed in its most vital phases - accumulation and distribution. Learn more about how they work and the options that may be available to you.
If you're concerned about the possibility of outliving your assets during retirement, you're not alone. It's a growing concern for two major reasons:
First, of the three traditional sources of retirement income—Social Security, employer pensions, and personal assets—personal assets has become by far the most important. The other sources aside, it's generally up to you to save enough money to retire comfortably.
Second, increased life expectancies mean that today, most people should plan on spending up to 20 or 30 years, or even longer, in retirement.
If you're still in your working years (the "accumulation phase" of retirement planning) start now to build up your financial assets at retirement. If you're preparing to retire, or already retired (the "payout phase" of retirement planning), there are steps you can take to help your assets last.
For greater confidence that you'll have income as long as you live, consider a lifetime income option through an annuity with annuitization.
An annuity is a contract between you (the owner) and an insurance company that provides tax deferral and guaranteed payments through annuitization in retirement. When you're ready, you can "annuitize" the contract, meaning the policy value is converted to regularly scheduled income payments based on the income option selected through annuitization which includes Lifetime Income.
Lifetime income is one of several annuitization options available. You can choose the type of lifetime income option that best meets your needs.
- Lifetime income. Periodic income payments (generally monthly, quarterly, semiannually, or annually) are guaranteed by the insurance company for as long as the annuitant lives. Payments stop upon the death of the annuitant.
- Lifetime with period certain. Periodic payments are guaranteed for as long as the annuitant lives, or for a specified time period (5, 10, 20 years etc.), whichever is longer. If the annuitant dies during the specified time period, payments may continue to your named beneficiary until the end of the period. Payments then stop.
- Joint and survivor. Lifetime periodic payments are based on the ages and life expectancies of two people, usually spouses. When one annuitant dies, payments continue to the surviving annuitant until that person's death.
How are income payments determined when you annuitize?
The amount of the income payments depends on the policy value at the time of annuitization, the age and life expectancy of the annuitant (and joint annuitant, if any), and the income option you select.
If you select a fixed annuitization option, the payment amounts stay the same. If you select a variable annuitization option, the payment amounts may vary depending on the performance of the underlying investment options you choose.
A qualified financial professional can help determine which type of annuity and income option best suits your particular situation.
If you're thinking about a lifetime income option through an annuity with annuitization, keep in mind the following important considerations
Typically, once you select an annuitization option and income payments begin, you cannot change or revoke your selection.
You may want to talk with a qualified tax professional for guidance.
An annuity's guarantees are based on the claims-paying ability of the issuing insurance company. Because an annuity contract can last for decades you should be confident about the financial strength and longevity of the issuing insurance company.
You can check the issuer's financial strength and claims-paying ability ratings from independent rating agencies such as Standard & Poor's, Moody's, A.M. Best, and Fitch. Remember, ratings do not apply to the safety or performance of the subaccounts.
For more information, please see the following educational articles:
- What is a Variable Annuity?
- The Value of Working With a Financial Professional
- What is Annuitization?
- What is a Fixed Annuity?