Immediate Annuities can be a great way to create a personalized pension for yourself in retirement . As a Fincial Advisor I assist clients everyday in navigating the road to retirement. The biggest challenge that individuals face is the risk of longevity (you may live too long). That is why the pension plans of the last 60 years were so nice, people had a stream of income they never had to worry about outliving. In addition to company sponsored pension plans social security was another source of guaranteed income. Over the years however the sources of guaranteed income from a company are becoming more and more rare. Instead of retirring with a lifetime of income most retirees are left with a lump sum of money, typically from a 401(k) that they need to make last the rest of their lives. Given market volatility and how long we are living these days that can be no easy task.
That is why immediate annuities have become so popular over the years is because of their functionality. The typical immediate annuity allows an investor to deposit a lump sum with an insurance company (say $200,000) and in exchange they receive a lifetime of income immediately (say $15,000 per year) that they never have to worry about outliving. One of the nicest features of an immediate annuity is the ability to customize it anyway you see fit.
For example if you want a higher payout for your money you could choose a single life immediate annuity. In this case the insurance company would pay you a lifetime of income as long as you are alive. The risk you bear is that if you die after only a couple of years the insurance company is done paying after only paying out for your life. Consequently if you live for a really long time the insurance company is obligated to pay you out for the entire time. Many immediate annuities that are offered by insurance companies offer a period certain whereby you could purchase an single life annuity with a 10 year period certain. In this case you are buying protection that if you die within the first 10 years the insurance company is still going to make your monthly payments to your named beneficiary up to 10 years from your first payment. These period certain options are available on most immediate annuties and can come in 5, 10 15, and 20 year period certain. If you are interested as to how an immediate annuity may play a role in your retirement picture send us an email at ryan@annuityrateshopper.com or call us at 888-515-7152.