You know the importance of saving for retirement. But sometimes it’s hard to know the best way to go about it. Annuities can help eliminate the guesswork by setting you up with a reliable retirement income stream.
Annuities are available in different forms.
- Immediate annuities convert a lump-sum premium into a stream of income for either a set period of time or for the rest of your life.
- Deferred annuities start paying you at a later date, offering the potential for tax-deferred growth during the accumulation phase.
- A fixed annuity pays a specific, guaranteed interest rate on your
contributions to the account. - An indexed annuity pays an interest rate based on the performance of a specified market index, such as the S&P 500. This is not the same as a variable annuity, which bases its interest rate on a portfolio of securities chosen by the annuity owner.
Two of the main benefits of annuities are:
- The creation of a predictable income stream to fund retirement. With an annuity, you don’t have to worry about outliving your savings.
- Annuities allow the investor to save money tax-deferred until a later date. Annuities have no contribution limits, unlike 401(k)s and IRAs.