Annuities-Income for Life
You try to protect your car, home, and your health with insurance, but are you trying to protect your retirement income? With the potential for tax-deferred growth and a guaranteed income stream, annuities can be important in helping meet your retirement objectives.
How Annuities Work
Very basically, an annuity is a contract between you and an insurance company. The contract allows you to contribute money to a tax-deferred account. In return, you can get regular payments from the account as income. Many aspects of an annuity can be tailored to a buyer’s specific needs. Besides choosing between a lump-sum payment or a series of payments, you can also choose when to start receiving payments. An annuity that begins paying out immediately is referred to as an immediate annuity, while one that starts at a predetermined date in the future is called a deferred annuity.
The duration of the disbursements can also vary. You can choose to receive payments for a specific period or for the rest of your (or your spouse’s) life. Naturally, a lifetime of payments may lower the amount per check. However, it helps ensure that you don’t outlive the asset, which is an annuity’s key selling point.