What’s An Annuity And How Can It Help My Retirement?

growing your money through annuities
June 27, 2022

Stocks/Equities are part of your financial plan, whether you are retired or saving for retirement. While stocks have been proven to grow your money, they can have a lot of ups and downs. If you are looking for more certainty in your retirement savings, you can add an annuity to your financial plan to diversify your portfolio and help protect you from the uncertainty that can come with stock.

An annuity can offer you protection from market volatility because of what it’s not. An annuity isn’t a bond, stock, mutual fund, real estate holding, or commodity with market-driven value.

An annuity is a long-term contract for your retirement planning between you and your insurance company. While there are a variety of annuities out there, fixed annuities provide you with guarantees that help ease your mind about market conditions and whether you will outlive your retirement savings.

How do Annuities Protect Me From Market Uncertainty?

As you save for retirement with deferred annuities, you can build your wealth over time, as well as with tax advantages. Interest income grows tax-deferred. In the future, you can withdraw this money to use it for whatever you desire, or you can transform the value of your annuity into an income stream that can’t be outlived when you retire.

The two main types of annuities are fixed and variable. Fixed annuities will never lose money regardless of market conditions. They have a guaranteed minimum interest rate. Last year is always your worst year. Your annuity will only increase in value. If you are looking for a way to have consistent growth within your retirement portfolio, a fixed annuity is a great option.

Deferred annuities will provide income for the rest of your life. With most differed annuities you make a single payment and can make additional payments. Another choice to consider is a multi-year guaranteed annuity. Also known as an MYGA where your interest rate is locked in for 3, 5, or 7 years regardless of market conditions your rate is fixed.

How Can an Annuity Protect My Retirement Income?

When you are heading towards retirement or are in retirement, you will shift your focus from investing to getting income from your investments. When it comes to the value of your investments, that is an uncontrollable variable within your income when you are retired, whereas your income needs are steady.

This becomes a prominent issue when the value of your investments goes down in the market. This will require you to sell more shares to help you create the same amount of income from your investments. On the other hand, you can reduce the amount of income that you create from the sale of your investments.

Rather than dealing with this unpredictability, you annuitize your annuity. With a fixed annuity, you will receive a scheduled payment for the rest of your life. When it comes to the amount of income that you receive will depend on a variety of factors such as annuity value, age, and whether you elect a period certain. A period certain for example of 10 years is guaranteed to pay out for 10 years to your beneficiaries if you were to pass during that period.

We don’t offer an SPIA You may also consider an immediate income annuity. This type of annuity is a lump sum payment that is made to an insurance company, which in turn agrees to make the payments to you for the duration of your life. Once the lump sum payment is made, you will see your income start to come in.

Work With Polish Falcons for Your Retirement

At Polish Falcons of America, we can help you choose the right annuity for you to add to your retirement plan. To learn more about our variety of annuities and retirement plan options, contact us today!