Retirement Income for Life
Hitting retirement and having no guaranteed income can be detrimental to your health.
According to the American Psychological Association, older individuals with lower socio-economic status are at risk for increased mortality rates, higher stroke incidence, higher progressive chronic kidney disease, and lower health-related quality of life.
So, having a secure way to receive a steady income after retirement will help you live a full life.
But how do you go about doing that? How do you get guaranteed retirement income for life right now?
Well, we’re here to talk about how you can get a guaranteed income stream with an annuity and avoid the scammers because they are out there. So, let’s dig in.
How Does An Immediate Annuity Work?
A single premium immediate annuity (SPIA) is probably what you’re thinking of when you think guaranteed income for life.
You might be on the cusp of retirement, and worried about your income needs.
A SPIA allows your to start receiving income right away. It’s an agreement with your insurance company that allows you a guaranteed stream of income
Your insurance company will then calculate your monthly income based on a few things.
- The type of annuity you purchased
- The insurance company, each one prices these different and you should shop this around
- Your life expectancy based on your age and gender
- And the term of the annuity you’ve chosen, how long you would like your income stream gauranteed for
Your Choices When It Comes to Immediate Annuity Income for Life
Inflation can happen. It’s a risk you take when investing in pretty much anything.
But you can have your insurance carrier give you a variable payout in case of inflation.
It really depends on if you want to maximize your payment now or not.
A fixed payout will give you the most income today. But a variable payout will mean having to do with less right now. If you are retiring soon, this might be the right option as you have some income from your current job still trickling in. I would suggest looking at index annuities with a life time income rider if you would like rising income.
If you do go with a variable payout/rising income option it will most likely be tied to a stock market index with a minimum guaranteed amount.
The purpose of an annuity is to minimize risk. So go over the options and see which options will help you have guaranteed income for life.
What Are the Variables and Terms of an Immediate Annuity?
A term in insurance speak is the amount of time your guaranteed annuity income will last.
You can specify the number of years the annuity will last. This may not give you guaranteed income for life.
The life annuity will provide you income for life. This means, of course, for as long as you, and you alone shall live.
There are joint-life annuities. If you are married, a joint-life annuity option might be best.
If one spouse dies, the annuity continues to be paid to the surviving spouse.
What Variables Depend on Age And Gender?
This essentially affects your payout amount.
Of people over 100 years old, 85% are women.
Essentially, women live longer than men on average. And insurance companies take this into account.
They typically pay out LESS for women than men because of the life expectancy gap.
What Are Typical Rates for Immediate Annuities?
If you’re looking at obtaining guaranteed income for life through an annuity, then you probably want to know the rates.
Remember, you’re buying an annuity for income guarantees, then returns become secondary.
If you want higher returns, you have to take risks. And risks could leave you broke.
But, even with a guaranteed annuity, the longer you live the greater the returns.
So, don’t compare the payout rate or calculated rate of return on an immediate annuity to compare this to any other kinds of investments.
Instead, the rate you’re looking at should be used for comparison between annuities at different insurance companies.
One of the benefits of an immediate annuity is that any other capital you don’t use to buy the annuity can go to other investments.
In essence, you can build your wealth with an annuity coupled with other investments.
And the security it affords can’t be measured in the monetary rate of return estimates.
Immediate Annuities Are Only a Portion of Retirement Savings Income
This is not meant to be all the income you receive during retirement.
If you calculate the annuity rate you will receive, you will only get $558 dollars a month if you are age 65, male, live in Tennessee, and purchase the annuity for $100,000.
That’s maybe enough to buy groceries and maybe pay a bill or two.
If you want the highest payment, you will have to give up access to the 100,000 you put in.
You will want to have a diversified portfolio of ETFs and mutual fund and such to maintain your standard of living.
You might have guaranteed income for life, but that’s more of a safety net to ensure survival if other investments fail.
Again, this is more about peace of mind than returns or riches. Although, it can help you increase your wealth in the long run.
Be Careful When Buying an Annuity: Watch For Scams
You might be tempted to go with the insurance company that offers the highest payout.
Don’t. You need to do your research.
You will depend on the insurance company to remain good on their word when it comes to guaranteed income for life.
They must have an AM BEST rating of A- or better when it comes to financial strength ratings.
Only a fraction of the companies out there will give you the best deal and have your interests in mind. All the others are either not worth looking at or are downright scams.
Payouts between companies can vary widely. So make sure you compare your options and choose wisely.
The Bottom Line On Guaranteed Income for Life
If you’re about to hit retirement, you probably do want that safety net of guaranteed income.
You probably want to get an annuity with the right companies that will take care of you. And you probably want to mitigate the risk of not having an income after retirement.
If you do want these things, sign up for a free consultation to get more information on how to find the right annuity for you.