What about an Annuity?
BOTTOM LINE UP FRONT (BLUF):
If you want a safe, secure and lifetime income that you know will be there for you for the rest of your life – then let’s get together and talk about what you want to accomplish and run some annuity numbers for you.
Schedule a free consultation at the link at the end of this article.
What I mean by that is some people think we only want to help them by setting up a high cash value, dividend-paying, whole life insurance policy with a mutual insurance company to use to take over the banking function in their lives.
While much of our work is focused upon the banking policy concept, today I want to let you know that we will work with those who want to set aside money for retirement and not have that money in their banking pool of capital.
While many of you are better served to start with a banking policy, some of you may also be ready now or later to set aside money specifically for retirement, and for that purpose, we highly recommend that you use what is known as an Annuity.
A little Annuity primer here:
An annuity is a contract between an individual and an insurance company.
You pay the insurance company a considerable lump sum or a series of payments, and, in return, in the future (retirement is usually the case), you receive regular disbursements of a guaranteed amount for the rest of your life.
Disbursements can begin immediately or at some point in the future.
Annuities come in three main varieties—fixed, variable, and indexed—each with its own level of risk and payout potential.
The income you receive from an annuity is typically taxed at regular income tax rates, not long-term capital gains rates, which are usually lower.
When thinking about Annuities, think “lifetime income”.
If it helps, Social Security payments are a form of a lifetime Annuity.
But, with Social Security, be careful not to start claiming your money too early.
If you can, wait until age 70 to start taking your Social Security benefits, as you could be cheating yourself out of $100,000 to $200,000 if you live well into your 80s.
You would use an Annuity to provide a steady stream of income, typically during retirement; however, unlike the cash value of a whole life insurance policy, you cannot tap into the Annuity funds without some penalties, and you cannot borrow against money in an Annuity in the same way you can collateralize your cash value in whole life with a policy loan.
As for getting payments from an Annuity, you can set it up (especially if you are age 65 or older) to begin paying out monthly as soon as the Annuity is established (known as an “immediate annuity”).
Annuities that pay at some date in the future are called deferred annuities.
The duration of the disbursements can also vary.
You can choose to receive payments for a set period, say 15 years or so, or for the rest of your life, and you could set it up to pay after you die to a surviving spouse.
Of course, securing a lifetime of payments can lower the amount of each check, but it helps ensure that you don't outlive your assets, which is one of the main selling points of annuities.
Money if you live into your 80s or beyond.
There are three major types of annuities: fixed, variable, and indexed, and each has its own pluses and minuses relative to your situation and goals.
Details for each of these annuity types and where they might best apply are beyond the scope of this brief article.