There are several types of retirement annuity accounts offered from various insurance companies. The one that will work best for you will depend on your short and long term financial goals.
If you are closer to or at retirement, then a single premium immediate annuity account might be best. If you are saving toward retirement, then a deferred annuity with an income rider might be more appropriate.
Simply put, one size and type of annuity does not fit all situations. At Hyers and Associates, we work with a wide array of insurance companies in order to find the highest yielding annuities that best fit our client’s needs and goals.
Tax Deferred Retirement Annuity Accounts
Tax deferred annuities are best for those who are saving toward retirement and wish to accumulate funds that can later be used to generate a guaranteed income stream. Deferred annuity accounts accept both pre and post tax monies – either way the account will not be subject to income taxes until distributions are taken.
Non-qualified annuities (post-tax) are a common type of retirement annuity used for savings and accumulation. These accounts take advantage of compound growth and there are no requirements for when distributions must be taken. Owners can defer earnings and grow their retirement nest eggs for as long or as little as needed.
Fort those who have maxed out contributions to their retirement accounts, a non-qualified tax deferred retirement annuity can be a valuable investment. Contribution amounts are limitless, all funds compound on a tax-deferred basis and there are no distribution requirements.
Depending on your risk tolerance, a fixed, equity indexed, or variable annuity can be used to save toward retirement. In order to balance risk, some investors will use more than one type of account.
Lifetime Income With Certain Annuity Riders
We have written extensively about annuity income riders as these products offer a valuable way to grow your investment in order to later create a lifetime stream of income.
Several insurance companies offer income riders and they can be attached to fixed, fixed-indexed and variable annuities depending on your risk tolerance.
Income riders offer a safe and reliable way to save toward retirement. In a nutshell, income riders create a sub-account that is guaranteed to increase by a known percentage each year (say 7%). The sub-account can be activated at desired future time to create a lifetime income stream.
The sub-account is typically not available for full withdrawal, rather it is used to create lifetime income for the owners. Theses riders usually have a yearly cost (say .70) to the walk-away value of the contract, but those costs are not deducted from the income sub-account.
In this way, there are always two values at work; the walk-away amount and the sub-account value. We can illustrate both for our clients so they can better understand what to expect from these types of retirement annuities.
It is also important to note that some lifetime income riders are also offering leveraged protection for long term care expenses, inflation protection, and in other cases full access to the sub-account value if it’s taken over a period of years. The bottom line is these riders offer known and dependable future lifetime income for their owners.
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Immediate Income Annuities During Retirement
If you are at or very near retirement, then an immediate annuity might work best to create retirement income. Many consumers use these accounts to generate systematic payments for a set number of years – if not a lifetime.
The acronym used by insurance professionals is SPIA: Single Premium Immediate Annuity. SPIA accounts are usually funded with a lump sum investment in order to create a desired stream of income for one or two lives.
There are several ways to structure an immediate annuity to best fit the needs of the investor. Payments can be made for a set number of years (period certain), a lifetime, or a lifetime with period certain. Invested funds will earn interest before distribution and in some cases payments can be adjusted upwards for inflation each year.
We work with several SPIA providers in order to find the best payouts from the most highly rated insurance companies.
Contact Us For Annuity Information
Hyers and Associates is a full service, independent annuity agency. We offer fixed, indexed, immediate and income annuity riders from many, many carriers. We can help you compare and understand the policy(s) that may best fit your retirement needs.