Like most people, you probably want to retire as soon as possible. For most, that means retiring around age 65, or when Social Security benefits kick in at full value. Do you have plans for retiring somewhere with a good view, like a mountain home or somewhere with a local golf course?
Maybe you just want to stay in your current home because you like the neighborhood. No matter where you want to retire, you’ll need plenty of money. If you want to retire somewhere exotic or live a cushy life, you’ll need more than just a Social Security payment.
It’s time to start generating retirement money now
Do you have a plan for generating income that will sustain you through your retirement? If you’re like most people, you probably have a 401(k) from your employer. That’s a great first step, but if you hope to rely on a 401(k) to carry you through your golden years, you should be advised that it probably won’t be sufficient.
It’s crucial to have a variety of income sources for retirement, from 401(k)s and IRAs to annuities. Most people know about 401(k)s and IRAs, but what about that last item? Have you ever thought about investing in an annuity? If you want to retire comfortably, here’s why you’d be smart to include at least one retirement annuity in your general retirement financial plan.
1. Retirement annuities are easy to get
In the United States, at least, annuities are easy to obtain. Many top insurance companies offer annuities to their customers, but they’re also available to non-customers as well. Annuities can be either fixed or variable.
Which one you choose will depend on how much cash you can put down at once. Fixed annuities require you to pay the full investment at once. There are benefits and drawbacks to each, but the best benefit is that fixed annuities are tax-deferred.
An annuity is a contract with an insurance firm that guarantees regular payouts for the rest of your life in exchange for an initial investment. Traditionally, annuities were obtained through insurance agents and the paperwork was signed in their office. Nowadays, however, you can also obtain annuities online.
For example, Due.com offers both fixed and variable annuities. Like all fixed annuities, Due’s annuities will grow under tax-deferred conditions, so you won’t have to pay taxes on your earnings until you start to withdraw the funds. The best part is that if your annuity isn’t connected to your IRA or other retirement plan, you can make withdrawals before you turn 72.
2. Annuities are affordable
If you’ve got money to invest, annuities are an affordable and wise investment. The amount of your annuity should be based on the monthly payout you’d like to receive, however.
For example, with a $100,000 immediate annuity, you can expect around $450 per month. If that’s not enough, you’ll want either to invest more money or invest in additional annuities over time.
Some financial institutions have high investment minimums, but you can pay for your annuity in installments. The only downside to paying that way is having to receive deferred payouts. However, for a retirement annuity, that’s perfectly fine since you won’t need the payouts until later.
If you can’t afford to invest in a large annuity right away, you can obtain several smaller ones over time. Since they’ll be reserved for your future retirement, you can accumulate annuities whenever you can afford them.
3. Annuity payouts are substantial
Your annuity will grow over time and larger annuities will provide substantial payouts. For example, it’s possible to invest in an annuity that will provide $1,000 or more per month when you retire. For instance, a $750,000 annuity could potentially pay out between $3,000 and $9,000 per month.
Granted, if you’re already 70 years old, you probably wouldn’t want to get a $100,000 immediate retirement annuity. If the payout is only $450 per month, the annuity will cost you more than you’ll get in payouts throughout the rest of your life. The good news is that some annuities provide legacy clauses that allow you to gift the remainder of your annuity payments when you pass away.
4. You can get joint life annuities
Some annuities are for a single lifetime, but you can also get a joint lifetime annuity that will take care of you and your spouse. The payouts for a joint lifetime annuity are generally smaller, but can still be substantial if the initial investment is significant. For example, if you purchase a $1,000,000 annuity, you could get between $50,000 and $230,000 per year for the rest of your life.
5. Retirement annuities are relatively secure
Although no investment can be completely secure, an annuity is far more secure than most other options. The risks are different from those you face if you play the stock market. For example, with a fixed annuity, you don’t have to worry about losing your initial investment like you do with the stock market.
If you get a variable annuity, your payouts will be determined by how well your chosen stocks do, but you still won’t have to worry about losing your initial investment. If you’re looking for ways to create retirement income that won’t disappear entirely if the market crashes, think about adding some retirement annuities to your portfolio.
Retirement annuities should be part of your overall retirement plan
Your retirement plan is vital to your well-being in your old age. If you plan on retiring comfortably in an area of your choosing, investing in annuities today will help you live a comfortable lifestyle during your golden years.
Before you rush out to get some annuities, think about how much money you’ll need each month to live your desired lifestyle. When you create a plan to generate that income, include your annuities in your calculations.
Out of all the possible investments you can line up, if you haven’t considered a retirement annuity, the above should give you a sense of why it would be a good choice.