• Mark Dierolf

3 reasons annuities are used for retirement

Updated: Mar 31

Annuities offered by life insurance companies are used for:

  1. Payments starting now or later;

  2. Growth of retirement savings or a benefit; and

  3. Heirs when life insurance is no longer an option.

Social Security and pension plan payments are examples of an "income" annuity. But when payments are deferred, it's called a "deferred" annuity.


Annuity deferral is usually at least 3 years so your savings or a benefit may grow. Expect a tax penalty for withdrawals from a deferred annuity before age 60, but growth may be tax-deferred until savings is withdrawn.


Annuities also have survivor benefits: A spouse may be able to takeover ownership of a deferred annuity; a child may exchange a deferred annuity for another; and anyone may be able to elect or takeover annuity payments.


An income annuity works like a loan in reverse with you receiving payments from the insurance company of principal and interest. Payments to you are either for a certain period or a lifetime so you will have no worries of running out of savings.


The "maturity" of a deferred annuity is when income payments must begin. But savings are often withdrawn long before then.


Deferred annuities often pay better than a bank CD and are a great choice when you don't need the savings until age 60. Your savings and benefits are backed the insurer's claims-paying ability.


Annuities are either "variable" or "fixed:"


Variable annuities may offer a promise of payments, but your savings are not safe from a market downturn. Variable annuities are for savers with investment experience and who can afford to lose money.


A fixed annuity is the way to go when no worries is the goal:

  1. Safety from a market downturn;

  2. Growth may be laddered like with a bank CD; and

  3. Earnings may be tied to an index without worries of market volatility.

Savers love annuities. Call today to learn more or for a review of an existing annuity, including Social Security:


Mark Dierolf @ (831) 753-0507

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