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Topic Retirement Income & Annuities

Retirement Income & Annuities

How is the fixed annuity rate guaranteed?

Any guarantees made by an insurance company are subject to the financial strength of the insurance company and their claims paying ability. Additionally, each state does have its own guaranty fund, but it should not be thought of as a substitute for FDIC insurance, which annuities do not have. State guarantee fund rules vary significantly state-by-state. You can find more state specific information here.

Retirement Income & Annuities

Do I have access to the money in a fixed annuity?

Some fixed annuities (generally those paying the highest rate) do not allow for any withdrawals during the guarantee term without a surrender charge. Surrender charges vary, but can be as high as 9% in year 1 and typically decline by 1% per year (and are 0% at the end of the guaranteed rate period). Other fixed annuities allow for penalty-free withdrawals of interest earned. However, this is sometimes restricted in the first year. Still other fixed annuities allow for withdrawals of up to 10% per year of the beginning balance at the start of the year. At Blueprint Income, we lay out plainly, product by product all charges and options associated with a withdrawal. See them and filter by withdrawal allowances for fixed annuities here.

Retirement Income & Annuities

What is retirement income?

Retirement income is the “salary” you receive once retired. The traditional sources of retirement income are Social Security and pensions, both of which are guaranteed to last for life. Annuities provide supplemental guaranteed retirement income. In addition, you can generate retirement income (that isn’t guaranteed) by withdrawing from the assets you accumulated over time (think 401(k), brokerage and savings accounts).

Retirement Income & Annuities

Why do I need lifelong retirement income?

The average American is living longer, which means that your savings have to last longer too. At the same time, the decline of pensions has made it harder to be financially prepared for retirement. Preparing for retirement with just savings exposes you to market volatility and risks, i.e. your investments might lose value and/or you might live longer than you expect. Guaranteed retirement income — like pensions and annuities — mitigates both of these risks.

Retirement Income & Annuities

What is an IRA?

An IRA is a tax-advantaged personal retirement savings account (away from your employer). A Traditional IRA accepts pre-tax money and withdrawals are fully taxed as ordinary income. On the other hand, a Roth IRA accepts post-tax money and withdrawals are tax free. The money you save into your IRA can be invested in the stock and bond markets.

Retirement Income & Annuities

Can I purchase an income annuity from Blueprint Income?

Yes! By opening a Personal Pension, you are setting up an income annuity account. Unlike with a traditional income annuity, the Personal Pension allows you to start small and contribute flexibly over time. However, you can always opt to just make one large payment with an insurance company in which case you’d be getting a standard income annuity. Similar to the Personal Pension, we only offer income annuities from top-rated insurance companies.

Retirement Income & Annuities

Where do insurance companies invest my money?

Your money is invested conservatively in the insurance companies’ General Accounts, largely in fixed income investments as well as in some equities. Importantly, they take on all of the investment risk. So if the markets underperform, it’s on them. Not you.

Retirement Income & Annuities

What is an annuity?

An annuity is a form of insurance that protects your longevity. When you purchase an annuity you pay an insurance company, who invests your money, and promises to pay you a fixed and guaranteed amount of income starting on a future predetermined date and continuing for the rest of your life.

Retirement Income & Annuities

How can I generate retirement income?

As long as you pay taxes, you’re already generating retirement income in the form of Social Security. If you’re lucky, you may also have an employer pension. Otherwise, you can generate retirement income by saving into a Personal Pension. Each deposit into your Personal Pension turns into a guaranteed income annuity.

Retirement Income & Annuities

How does retirement income differ from retirement savings?

Retirement savings are a finite amount of money that you will need to withdraw money from to support your retirement. Unless you’ve amassed a very significant amount of wealth, you risk running out of money in retirement for many reasons, like:

  1. you wound up living longer than you expected or
  2. markets didn’t do as well as you expected.

Retirement income, on the other hand, is infinite. It comes in the form of Social Security, pensions, and annuities, all of which are not dependent on the market and are guaranteed to last as long as you do.