Retirement Planning and Annuities
Planning for a secure and comfortable retirement is one of the most important goals in anyone’s financial life. At Vida Wealth Group, we specialize in creating durable retirement planning strategies that provide peace of mind. A core component of this strategy can be annuities, which are powerful tools designed to deliver a reliable, guaranteed income stream that you cannot outlive. Let us help you navigate the options to build a retirement you can look forward to.
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Exploring Annuities in Your Retirement Planning
Fixed Annuities
For those seeking stability in their retirement planning, fixed annuities are an excellent choice. They offer a guaranteed, fixed interest rate on your contributions for a set period of time, protecting your principal from market volatility while allowing your retirement savings to grow on a tax-deferred basis.
Indexed Annuities
Indexed annuities offer a unique balance of safety and growth potential. Your returns are linked to the performance of a market index, like the S&P 500, allowing you to capture a portion of the market’s gains. This can be a powerful component of a diversified retirement planning strategy.
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What is an annuity?
An annuity is a long-term insurance contract designed to provide a guaranteed income stream, typically during retirement. You make a payment or series of payments, and in return, the insurer agrees to make periodic payments back to you, either immediately or at some point in the future.
What are the main types of annuities?
The primary types are Fixed Annuities (which offer a guaranteed interest rate), Variable Annuities (where payments fluctuate based on the performance of underlying investments), and Indexed Annuities (which offer returns based on a specific market index, like the S&P 500, with protection against loss).
What is the main benefit of an annuity?
The main benefit is security. Annuities are one of the only financial products that can provide a guaranteed stream of income that you cannot outlive, protecting you from the risk of running out of money in retirement.
How do annuities grow money?
Annuities grow on a tax-deferred basis, meaning you don’t pay taxes on the interest or investment gains until you start withdrawing money. This allows your funds to compound more rapidly.
Are annuities a good investment?
Annuities are best thought of as an insurance product for retirement income, not a high-growth investment. They are “good” for individuals who prioritize safety of principal and a predictable income stream over the potential for high market returns (and losses).
When can I start receiving payments from my annuity?
This depends on the type. An “immediate annuity” can start paying out as soon as 30 days after you purchase it. A “deferred annuity” is designed to grow for a period of years before you turn it into an income stream in the future.
What happens to the money in my annuity if I die?
Most modern annuities come with a death benefit. If you pass away before receiving all your payments, the remaining value in your contract will be paid out to your designated beneficiary.
What are some of the fees associated with annuities?
Fees can vary widely. Indexed and fixed annuities often have lower internal costs, while variable annuities can have higher fees for investment management and insurance riders. It’s crucial to review the contract for any potential surrender charges, which are fees for withdrawing money early.
How much of my retirement portfolio should be an annuity?
There is no single answer, as it depends on your risk tolerance and income needs. A financial professional can help you determine what percentage of your assets is appropriate to allocate to an annuity as part of your overall retirement planning.
What is a “rider” on an annuity?
A rider is an optional feature you can add to an annuity contract, usually for an additional cost, to provide extra benefits or protections. Common riders include guaranteed lifetime withdrawal benefits (GLWB) or enhanced death benefits.