One benefit of Social Security payouts and some company-sponsored pensions is that they can provide income for retirees as long as they live. But if you don’t have access to these options or are looking for an additional way to receive lifelong income payouts, annuities could be worth considering.
An annuity is a contract purchased by an individual that provides retirement income in return for a premium. The different features and contract terms of annuities vary widely, but one payout option is to receive income for life. Some annuities even continue paying out income to a spouse after the contract owner dies, which is referred to as joint-and-survivor distribution.
The amount of income paid out in installments is determined by the amount of money used to purchase the contract, the age of the owner (and the spouse, if included in the payout equation) and the level of interest rates.
While Social Security benefits are backed by the full faith and credit of the federal government, annuities are guaranteed by the financial strength of the issuing company — which is always an insurance company.
This is why one of the important things to look for in an annuity is an issuer that has a high rating for financial strength from A.M. Best Company, Fitch, Moody’s and/or Standard & Poor’s. These are independent firms that specialize in assessing financial strength. It’s a good idea to check out the insurance company’s rating from two or more of these agencies, since their assessments may differ. You can also contact the insurance company directly or your state insurance department to inquire about an insurance company.
It’s also important for people working on a retirement income strategy to consult with a knowledgeable financial professional to determine if an annuity is a possible solution for their particular circumstances, and, if so, which type of annuity would be most appropriate.
Annuities are insurance products that may be subject to fees, surrender charges and holding periods which vary by company. Annuities are not a deposit of nor are they insured by any bank, the FDIC, NCUA or by any federal government agency. Annuities are designed for retirement or other long-term needs. Contact us at firstname.lastname@example.org or call us at (952) 460-3260 to schedule a time to discuss your financial situation and the potential role of investments in your financial strategy.