Annuities 101
Are you planning for retirement? While not appropriate for everyone, annuities can be a useful tool for retirement accumulation and creating income in retirement.
An annuity is a contract you purchase and fund to receive money over a specified period of time plus interest. When you purchase an annuity, the insurer agrees to repay your money – plus the interest it earns – either in a lump sum or over a period of time you select. These products come in a variety of different specifications and can be used as fixed and guaranteed income in retirement — some even offer the potential for significant growth. Annuities are intended for long-term retirement goals, and taking withdrawals or surrenders from these products may result in additional charges, so be sure when considering annuities to consult with a financial representative. Always remember that guarantees are backed by the strength and claims paying ability of the organization or company you’re working with.
Deferred Fixed Annuities
You can purchase a fixed annuity with a lump sum payment, or with flexible premiums (several payments over time), and receive a guaranteed minimum rate of return. The insurance company will pay interest at a fixed rate, guaranteed for one year and typically established when you purchase your annuity. In subsequent years, the rate may change as interest rates fluctuate but will never fall below the initial guaranteed minimum rate l. These contracts will then pay out over a length of time you choose, including an option for lifetime income. A deferred fixed annuity may be right for you if you want guaranteed, dependable growth and plan to take income down the road, such as during retirement.
Variable Annuities
These have values that fluctuate over time, according to the performance of the investment options and fixed accounts selected. Investments in fixed accounts earn at least a minimum interest rate guaranteed in the contract. These will also allow you to accumulate assets on a tax-deferred basis. This means your money has the opportunity to grow faster, because you don't pay taxes on earnings until you actually withdraw them.
Immediate Annuities
These can help you turn assets or inherited lump sums of money into retirement income for your lifetime, regardless of how long you live. Your income payments begin immediately. These products can provide a range of benefits including income options, you choose from several payout options, including lifetime income. If you pass away during the guaranteed period, your beneficiaries may continue to receive annuity payments for the rest of the period, or the present value of any remaining payments.
If you are near retirement and are concerned about whether you have the right portfolio of products in place, annuities might be worth a look. You can also choose an annuity which may offer a higher interest rate for increased growth and can offer a sense of reassurance by providing retirement income.
If you’re looking for retirement income options, talk with your financial representative to see if an annuity would fit into your financial strategy.
You can read more at www.thrivent.com/annuities.
This article was prepared by Thrivent Financial for use by Edmonds area representative Merrillee Bradshaw. She has an office at 15117 Main St., Suite #206 in Mill Creek and can also be reached at 206.949.2204.
