You know the importance of saving for retirement. But sometimes it's hard to know the best way to go about it. Annuities can help eliminate the guesswork by setting you up with a reliable retirement income stream.
What Is an Annuity?
Simply put, an annuity is an insurance product that distributes ongoing payments to an individual for retirement income. There are various types of annuities and options to help meet your needs.
This structure is generally ideal for clients with an available sum of money to convert into lasting income (think an inheritance or Individual Retirement Account [IRA] rollover). Some benefits include:
- Income payout options – like recurring payments over a fixed term, or until you die.
- Start receiving income payments right away.
- Possible death benefit paid out to people and causes of your choosing.
This structure works well for clients who value tax efficiency and want a say in when they start taking out their money. Key features include:
- No income tax payments until you’re ready to take money out.
- Potential for your principal to grow before you start receiving payments.
- No annual contribution limits (unlike IRAs and 401[k]s).
Under this rate option, your premiums earn interest at set rates – a current interest rate typically declared on an annual basis, and a minimum guaranteed interest rate.
- Benefit: Fixed annuities are generally not affected by market volatility
- Drawback: The value of the annuity may not keep pace with inflation, given the set interest rates
This rate option yields returns based on the performance of your investment’s subaccounts.
- Benefit: Because funds are invested in variable subaccounts, they may keep up with – or outpace – inflation.
- Drawback: The annuity’s investments are dependent on market risk and performance, and could lose principal.
Annuities are intended to be long term, particularly for retirement. Product availability and features may vary by state.
Withdrawals and surrenders will decrease the value of your annuity and, subsequently, the income you receive. Any withdrawals in excess of 10% may be subject to a surrender charge. The taxable portion of each annuity distribution is subject to income taxation. Withdrawals made prior to the age of 59 ½ may be subject to a 10 percent federal tax penalty.
Surrenders or partial withdrawals/surrenders may be subject to income taxes and/or surrender charges.
Investing involves risk, including the possible loss of principal. The product and summary prospectus contains information on investment objectives, risks, charges and expenses. Read carefully before investing. Available at Thrivent.com.