Is an Annuity Right for You?

by Community Manager ‎02-11-2015 01:48 PM - edited ‎03-05-2015 09:17 AM (11,273 Views)

Find out how your retirement strategy could benefit from an annuity.

 

For many Americans, financial peace of mind is a critical part of an enjoyable retirement. A robust pension could provide fiscal security, but, lacking that, how can someone establish a reliable source of income for their golden years? One option to consider is an annuity.

 

What Is It?
The way an annuity works is simple: You put a designated amount of money into the annuity (in a lump sum or over a period of time), and when you retire, the annuity makes payments to you at regular intervals, over a specified period of time. You can customize an annuity to fit your specific needs by customizing your contributions, the duration of the payments and more.

 

What Does It Offer?
One of the most attractive features of an annuity is that it can be set up so you will receive payments for the rest of your life. Annuities offer other advantages as well. Earnings on an annuity are tax-deferred*, meaning no tax is due until you actually take the money out. Because annuities’ inherent level of risk can be lower than some other retirement products, they can diversify a retirement portfolio by providing stability. Also, there is no annual contribution limit for non-qualified annuities (those funded with after-tax dollars), which makes them especially useful to someone nearing retirement who has not set enough aside.

 

What Else Should I Know?
Annuities are long-term products. There may be a surrender charge if money is taken out too soon (usually within the first few years). Also, an annuity owner younger than 59 1/2 who withdraws money may be subject to a 10 percent IRS penalty. Annuities cannot hold funds indefinitely; owners of qualified annuities (those funded with pretax dollars) must take required minimum distribution payments as determined by the IRS.

 

If you could benefit from a guaranteed source of income during your retirement, an annuity might be a good option for additional peace of mind.

 

*AAA Life Insurance Company and its agents do not provide legal or tax advice. Therefore, you may wish to seek independent legal, tax or financial advice prior to the purchase of any contract. Life insurance underwritten and annuities offered by our affiliate, AAA Life Insurance Company, Livonia, MI. AAA Life is licensed in all states except NY. AAA Life CA Certificate of Authority #07861. ALMI-22390-D14-XX

 

To learn more about the benefits of owning an annuity, contact your AAA Life Insurance Specialist or visit AAA.com/Agent.

 

A version of this story appears in the March/April 2015 issue of AAA Living magazine.

 

Image credit/source: Thinkstock

 

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