In addition to your 401(k) or IRA, annuities can play a significant role in your retirement plan. In exchange for a lump sum payment to an insurance agency, an annuity guarantees you steady monthly payments, insulated from the highs and lows of the market and providing valuable peace of mind. The guide below explains how this investment can make your golden years peaceful and stress-free.

Why Invest in an Annuity?

1. Protection From Stock Market Fluctuations

As you approach retirement, your tolerance for risk goes down, as a dip in the market can wipe out the savings you were depending on. Annuities provide regular payments regardless of the day’s market activity, while still offering high-interest rates than most bank-offered savings accounts, like certificates of deposit (CDs). This guaranteed rate of return makes long-term planning easier. If you spend money on travels or your hobbies later on in life, you can rest easy knowing there will still be money coming in to cover unexpected costs.

2. Extending Your Savings

Some annuities begin providing payments immediately. However, many choose to defer them until a specified date—when the payments will be larger. For example, you can decide to wait until you’re 75 to begin receiving this income, essentially extending the life of your investments.

3. Tax Breaks

401(k)s and IRAs limit the amount of money you can apply to them per year, thereby reducing the amount of compound interest you can make on that money. Annuities don’t have such limits; furthermore, they grow tax-free. When it comes time for the insurance agency to start distributing payments, taxes are applicable on this income up to the amount of your original contribution, but not afterward, meaning the payments you get later will be worth more.
 

Understanding annuities can be confusing, which is why Kodiak, AK, residents rely on Sweeney Insurance Agency for help planning their financial futures. For over 40 years, this agency has provided personalized customer service and policies from several of the nation’s leading insurers. Visit their website or call (907) 486-3101 to make an appointment and request a quote. Follow the insurance agency on Facebook for more tips and advice.