How to Use an Annuity
Are you afraid of outliving your savings? Would you like to add another source of income in retirement? If so, an annuity might be right for you.
So what is an annuity? An annuity is a lump sum investment that provides a steady income for a fixed period or life. Annuities grow at either a fixed or varying rate and can either be paid immediately or deferred to a later date. Annuities can often add an extra layer of financial security to a retirement plan.
Annuities and retirement
Do you have an existing retirement account you are no longer putting money into? Since you can’t access that money until age 59 without a penalty, another option is to roll the money into another account. You can roll it into another 401k or IRA account, or you can put it into an annuity.
This is especially useful if you intend to retire early. You can invest money into an annuity before you are eligible to withdraw from your retirement account and/or collect social security. This would in turn give you steady payments.
Annuities can be a good option during retirement if you are worried that your current savings aren’t enough. By putting a lump sum of money into an annuity, you can guarantee income once your retirement funds are used up. You could defer the annuity to a set date, like your 75th birthday, or choose to begin receiving payments immediately.
Annuities should not be used as your only retirement strategy, but can be helpful in giving you some financial peace of mind. There are numerous types of annuities, so be sure to do your research or speak with an agent/producer to ensure you are getting the policy that best suits your needs.