How to Use Annuities to Fund Your Retirement

Whether retirement is in the distant future or right around the corner, preparing for the unknown now can ensure uninterrupted leisure time later. While pinching your pennies and chipping away at credit card debt may be enough to keep the collection agency at bay, treading water won’t adequately bankroll a life of undetermined length and unknown expense, especially as economists project interest rates to plummet* on high-yield savings’ accounts and a hike in inflation numbers** in the coming calendar year.

A low-risk option for late-life stability is the life annuity, which is an investment product that provides a steady flow of income over a predetermined amount of time, paying out with the frequency of a paycheck, but without the burden of labor. The wise investor can structure payments to last a lifetime, using their loose change today to fund a comfortable tomorrow.

Structured to meet your financial needs, annuities allow for lump sum down payment or payment in monthly installments, giving backers the freedom to receive cash at a trickle now or schedule payments to commence at an established time later. Immediate annuities are best for those on a fixed budget, paying out on an investment instantly, but in definable, smaller increments.


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Alternately, deferred annuities benefit those willing to play the waiting game, operating in two phases (the accumulation phase and the annuitization phase) and disbursing funds to the beneficiary after an extended period of investment. During the accumulation phase, the consumer deposits funds on a monthly basis, accruing a fixed rate of interest on all invested capital. After an extended investment period (anywhere between 1 and 10 years), the consumer will begin receiving a series of payments from their annuity broker, designed to finance their duration of life or the lifespan of a designated family member.

Although the prospect of tax-deferred interest and financial perspicacity are alluring, be sure to consult an annuity expert before diving into any insurance contract, since each plan and finance company will have its own set of stipulations. Most institutions will penalize consumers for early withdrawal of funds and variable annuity plans determine your income based on the performance of specific ventures chosen by you or a team of brokers. Be sure to read the fine print and maximize your potential for a return on investment, since backing the wrong horse could put your nest egg in jeopardy.

* Walsh, Ben, (August, 2019). Interest Rates Are Falling on Even the Most Generous Savings Accounts. Blame the Fed. Barron’s. Retrieved September, 2019
** Lee, Yen Nee, (March, 2019). Credit Suisse’s chief economist says he’s worried about US inflation shooting up. CNBC. Retrieved September, 2019