What are Income Annuities?
Just about any annuity can become an “income annuity”; most annuities after a certain period of time can be annuitized and turned into a stream of income for an agreed to amount of time. When you annuitize an annuity your asset is essentially absorbed into the holding company and they agree to give you a paycheck for a period of time you agree to. This income can last a lifetime even if your original investment has been exhausted by these payments the insurance carrier will continue to send your monthly or annual check.
Income Annuities do not always have to be annuitized to start providing income. Some annuities offer income riders for a small fee generally around .50 to 1.25% of your account balance every year. These types of income annuities with fees are nice because you can see what your income will be before you invest into the annuity. You can look 1-15 years into the future and know exactly what your income will be in any given year. These can be incredibly helpful when planning your retirement and provide peace of mind. There are some income riders that have no fees but the income amount is based on market performance. These are nice when someone wants income but doesn’t want to pay a fee. The downside is that you cannot be exactly sure what your income will be when you need it.
The primary difference between annuitization and income riders is that the income rider, if your life changes and you no longer want income or need to have access to your cash value you can take the remaining money in the account and cancel the paychecks. With annuitization your original asset is gone and you are just receiving payments.
find out if an income annuity, a steady stream of retirement income, is right for you
How Does an Income Annuity Work?
In its simplest form, you provide an insurance carrier with a dollar amount, like any other annuity you can earn interest, there can also be a fee. When you decide you want to turn on an income stream you or your financial advisor can contact the carrier. The carrier will send you an annual or monthly check for the rest of your life. If you’re married you can choose a joint payout ensuring the payment continues after the owner's death.
income annuities offer a few special benefits to their owner
Additional income during retirement. One of the biggest fears for folks about to retire or already in retirement is running out of money. Income annuities are a great way to take an asset and guarantee it will last as long as you do. This helps with planning, takes pressure off the rest of your investments, and really does offer peace of mind.
Even if your original investment has been exhausted by these payments the insurance carrier will continue to send your monthly or annual check.
Annuities have a named beneficiary so your assets go to exactly who you chose.
common questions we get asked about annuities
Your money is backed by the financial strength of the insurance carrier. It’s important to make sure you’re partnering with a strong company. Additionally there are protections from the state guaranty association.
I’ve heard annuities lock your money up and that you have little access. It’s true that annuities have surrender periods. A surrender period is the length of time the insurance carrier can hold your asset. But, you get to choose the length of time. Surrender periods can be as short as 2 years and as long as 10. Additionally all annuities offer annual free withdrawals of up to 10% and provisions if the owner becomes terminally ill or is confined to a nursing facility.
Some annuities have fees, and some don’t. Most annuities used for simple accumulation have no fees. If you are using an annuity for lifetime income it could carry a fee. If you have an annuity that you believe has too high of a fee or too many fees feel free to contact us for a free review.
If you pass away while still in an annuity contract any early surrender charges will be waived and the total account value will be sent to your designated beneficiary(s).
we can help you determine if an income annuity is right for you
Even if the asset is exhausted.
Lifetime income for married couples.
If you outlive your asset anything remaining of the original investment plus interest will go to your named beneficiary.
They are great for clients with longevity in their families.
Can offer limited nursing home protection for families who can’t qualify for Long-Term Care Insurance.
There generally is a fee anywhere from .50 to 1.25% of your total investment annually.
You are spending down an asset.
Generally there are not large gains on these types of annuities because they are strictly for income.
Not suitable for those expected to have shorter life expectancies.
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