There are several ways to plan for your retirement.
Planning for retirement has two phases. The accumulation phase and the distribution phase. We evaluate both of these phases up front to understand how much income your retirement savings will produce.
What is an Annuity?
An annuity is a contract in which an individual agrees to pay premiums to an insurance company and receives, in exchange, a regular stream of income payments from the issuer either now or at some time in the future. Unlike many financial products available, an annuity can provide an income you can't outlive.
The Main Benefits of Annuity Investing
A Guaranteed Death Benefit: Generally, annuities also offer a death benefit. While the types of death benefits differ between products, annuities allow you to pass the proceeds of the contract directly to a named beneficiary, avoiding the delay and expense of probate.
Tax-Deferred Growth: An annuity is a long-term financial product where interest accumulates tax-deferred. Because you do not pay taxes on annuity assets until you access the proceeds in your contract, your money grows tax-deferred. As a result, you may be able to accumulate more money than a traditional taxable investment earning the same rate of return.
How an Annuity Works
The duration of an annuity can be broken down into two phases: The accumulation phase and the annuitization phase.
Accumulation Phase: During this phase, earnings on the contract accumulate tax-deferred. Depending upon the type of annuity purchased, it may be possible to add additional premiums during this phase.
Annuitization: In this phase, the annuitant chooses a payout option and begins receiving income. Typical annuity payment options include payouts for one's lifetime, or for a specified number of years. Once the payout option has been chosen, it cannot be changed, nor can premium be added after the payout period begins.
Types of Annuities
Depending upon financial goals, need for income, and other considerations, individuals may choose an immediate annuity or a deferred annuity.
Fixed Annuity: You are credited a fixed interest rate that typically does not fluctuate over the duration of your contract.
Immediate Annuity: This type of annuity is designed to make payments to you shortly after your lump-sum premium payment is made. The income stream is paid periodically from the premium payment and accumulated interest earned on that premium.
Deferred Annuity: Unlike an immediate annuity, a deferred annuity allows you to postpone (defer) the start of your income payments until a time in the future that you choose. A deferred annuity is primarily designed to accumulate assets for long-term financial goals.
Taxable distributions (and certain deemed distributions) are subject to ordinary income tax and if taken prior to age 59 1/2, may also be subject to a 10% federal income tax penalty. Additionally, some distributions may be subject to surrender charges if made during the surrender charge period.
We Can Help!
If you are planning for income streams in retirement, we can help determine how much your assets will provide. Guaranteed Income illustrations can be provided based on amount invested, deferral period, and the age when income starts. We can help you decide which option will fit your income needs.
Symmetry Financial and it's agents are independent brokers and shop the market to determine which product will fit your individual situation.