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Building an Income Floor with A Fixed Annuity
During your working years, it may be that you have a certain amount of expenses to pay each month. To do so successfully, you may be mindful of what you have coming in and work towards ensuring that your incoming cash flow is more than the amount of your outgoing bills.
The same should hold true when you retire. While the income from your employer will go away, it is probable that your expenses will continue. In many cases, Social Security alone will not be enough.
In addition, with many employers doing away with defined benefit pension plans, there could be a significant “gap” between retirement income and outgo. So, to continue maintaining your lifestyle, it may be possible to build an income “floor” with a fixed annuity.
How Fixed Annuities Can Provide You with Guaranteed Income
Throughout the past decade or so, annuities have grown more popular with retirees, as well as those who are getting closer to retirement. One of the biggest reasons for this is because an annuity can provide you with a set amount of income, either for a pre-selected period (such as ten or twenty years) or even for the remainder of your lifetime – regardless of how long that might be.
Fixed annuities are insurance products, which is how they can provide you with a guaranteed amount of income for life – a feat that cannot be matched by bonds, CDs, interest, or dividends from stocks.
Depending on the type of annuity you purchase, you can begin the income right away (using an immediate annuity,) or alternatively, you can wait and start the income at a time in the future with a deferred annuity (and in some cases, you could even wait for 30 or more years).
Most fixed annuities offer you different options for receiving your income. These will typically include the following:
- Period Certain – As its name suggests, the period certain income option pays out for a pre-set period. Some examples would be ten or twenty years. If the income recipient (annuitant) dies before that time has elapsed, the payout will continue to a named beneficiary.
- Life Only – The life only payout will continue for the life of the annuitant – no matter how long that may be. This income alternative can help with alleviating the concern about running out of income in retirement.
- Life with Period Certain – If you choose the life with period certain income option, the payments from the annuity will go on for the annuitant’s lifetime. But, if he or she should pass away before a certain time has passed, income will continue being paid to a beneficiary for the remainder of that duration.
- Joint and Survivor – The joint and survivor option is oftentimes chosen by married couples or partners. Here, an income payout will continue until the death of the second individual.
Is a Fixed Annuity Right for Your Retirement Income Plan?
Fixed annuities can offer you a way to protect retirement income in any type of stock market or interest rate environment. But there are many of these products to choose from, and not all of them are exactly alike.
That is why it is important to go over your options with an annuity specialist who can help you to narrow down which type of fixed annuity – if any – is right for you. If you’d like to learn more about how fixed annuities can keep a minimum amount of income in place, feel free to reach out to our annuity experts at (281) 665-3081, or by sending us an email through john@crisfinancial.com. We look forward to helping you secure income security for the future.