Looking to Boost Retirement? Consider Annuities.

Reasons to Consider an Annuity

Here are some reasons an annuity might be beneficial as part of your comprehensive retirement plan:

• Lifetime income. Periodic payments are an appealing aspect of an annuity. They complement other retirement income sources like 401(k)s, Social Security and pension plans by providing a reliable stream of income for a set period, often the remainder of your life.


• Income options. There are various income payment options. These may include lifetime payments, lifetime payments for a minimum of 10 years (with payments going to your beneficiary if you die within that time frame), as well as rights of survivorship, which are payments that extend over your lifetime and your spouse's lifetime.


• Tax-deferred growth. Similar to an IRA or 401(k), you pay no taxes on your annuity's investment gains until you withdraw money from it. However, unlike an IRA or 401(k), there is no limit to how much money you can invest into an annuity. Once you've maximized contributions to an IRA or 401(k), an annuity provides an opportunity for more tax-deferred investing.


• Annuitization. If you choose to do so, you may assign the entire account/contract value to a financial institution. In return, you receive income for life.


• Guaranteed minimum withdrawal/income benefits. You may be able to purchase a rider to make a variable annuity more attractive. For example, you can ask for a guaranteed minimum withdrawal benefit that guarantees a steady stream of income — usually 5% to 10% of your original lump-sum principal per year — regardless of how the market performs.2


• Portfolio stability and principal safety. Annuities can provide the kind of portfolio stability typically provided by bonds, balancing out higher risk areas of a portfolio.3 In times of market volatility, an annuity can allow you to benefit from stock market gains while shielding you from losses.


• Benefit from higher interest rates. Fixed annuities can be appealing when interest rates are high because you get that rate for the life of the annuity, even if interest rates drop later on.


• Death benefits. If your annuity guarantees payments over a minimum time period, your beneficiaries may be eligible for a substantial payment(s) if you die before that period is up.

In It for the Long(er) Haul

Annuities are not typically suited to short-term financial goals because they often contain prohibitive surrender charges for early withdrawals. While these fees go down the longer you hold onto the annuity, the reduction is gradual. Fees can start anywhere from 7% to 25%.4

Also, the surrender charge period can last anywhere from three to 10 years after you purchase the annuity,5 so make sure you understand the length of time during which you won't be able to reclaim the full amount of your initial annuity purchase.

Yes, There Are Fees

Fees vary, but as annuities offer more benefits than a typical investment product, their associated fees can be higher than other products. Be sure to check and compare fees for competing products. It will help you better understand fees.

Always Talk to an Advisor First

Of course, there is much more to annuities than the information presented in this brief overview. Before investing, be sure to talk with an advisor. By examining your options within the context of your overall financial portfolio, your advisor can help ensure that you are investing in the vehicle that best meets your needs.