Income Annuities: 3 Strategies to Fund Your Retirement

Mike Gann Financial Planning, Retirement Planning

Concerned about your future retirement income? You’re not alone. According to a study from Gallup, nearly half of all future retirees predict that they won’t have enough income to live comfortably in retirement. That’s a sharp increase from the first such survey, in 2002, when only a third of respondents said they wouldn’t have enough income in retirement.1

Past generations of retirees could rely on employer pensions and Social Security to fund their retirement. However, today’s retirees must shoulder much of the burden for funding their income. Few employers offer pensions these days, and while Social Security is a valuable resource, it usually isn’t sufficient to fund a full retirement.

If you’re like most people, you’ll have to fund much of your retirement with your own savings. Those savings could be vulnerable to market risk, and a downturn might lessen your ability to generate income.

Fortunately, there are steps you can take to guarantee* your income and provide yourself with a comfortable and stable retirement. An annuity is one tool that can be an effective income source. Below are a few ways you could use an annuity to create predictable, guaranteed* retirement income:

Guaranteed* Income Now


Is retirement on the horizon? Do you need to develop a stream of retirement income in the near future? If so, a single premium immediate annuity (SPIA) is one tool to consider. You contribute a lump-sum premium amount into an annuity policy. The annuity company then converts that amount of money into an income stream that’s guaranteed* for the duration of the contract.

Your income amount depends on a few factors, such as your premium amount, interest rates and the duration of the income. The longer the income has to be paid, the lower the income amount will be. SPIA contracts are often established for lifetime income. The insurer will use an actuary table to project your life expectancy and determine your amount. However, the income is guaranteed* no matter how long you live.

Life isn’t the only income period option, though. You could choose a joint life option to cover two lives. Or you could choose a lifetime payment with a period certain. If you pass away, your income continues on to your beneficiaries for the remainder of the payment period.

If you need retirement income immediately and you want some predictability in your cash flow, you may want to consider a SPIA. A financial professional can help you determine which type and which payment option is right for you.

Guaranteed* Income Later


Not ready for income quite yet, but want something to depend on in the future? You may want to explore deferred income annuities (DIAs), also known as longevity annuities. As is the case with a SPIA, you contribute a lump-sum amount that’s converted into income payments. With a DIA, however, the income starts at some point in the future rather than immediately.

For instance, you could purchase a DIA at age 55 with income that starts at 65. Or you could choose to start the income even later, like age 70 or 80. One possible strategy is to purchase several DIA contracts with staggered income ages, like 65, 75 and 85. That way you could have guaranteed* increasing income throughout your retirement.

Lifetime Income With Growth Potential


Perhaps you don’t know if or when you will need guaranteed* retirement income, but you’d like to have the option at some point in the future. You may want to consider a deferred annuity such as a fixed indexed annuity. These contracts offer tax-deferred growth and annual interest payments.

The amount of interest is based on the performance of a market index, like the S&P 500. If the index performs well, you get more interest, up to a maximum limit. If the index performs poorly, you get less interest, but your contract won’t decline in value.

You can also add an optional guaranteed* income benefit to your contract. These benefits allow you to take a certain percentage of your contract value as a withdrawal each year. As long as you stay within the withdrawal limits, the income is guaranteed* for life. That means you can use the annuity as a tax-deferred growth vehicle and possibly a guaranteed* income source in retirement.


Ready to develop your income strategy? Let’s talk about it. Contact us today at Advantage Retirement Services. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.




*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.


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18406 – 2019/1/14