Could An Annuity Be the Crucial Component in Your Retirement Plan?
In the ever-evolving landscape of retirement savings, annuities are emerging as a sought-after component of a diversified retirement plan. According to LIMRA's U.S. Individual Annuity Sales Survey, total U.S. annuity sales surged 8% year over year to a record high $119.2 billion in the second quarter.
One type of annuity that is particularly attractive to people in the preservation phase of retirement savings is the fixed indexed annuity. These financial products offer a way to get exposure to the stock market and diversify a retirement portfolio. Fixed indexed annuities, also known as multi-year guaranteed annuities, have guaranteed interest rates and grow on a tax-deferred basis. They tend to outperform bank CDs because they are held longer, giving the insurance company more time to invest and grow the money.
Annuities provide a unique advantage: they offer guaranteed income for a person's lifetime. This feature is becoming increasingly appealing as people look for ways to secure their financial future in retirement. Guaranteed income annuities can be immediate or deferred. An immediate annuity is typically purchased with a lump sum and payments begin within 12 months or less. A deferred annuity, on the other hand, is designed to grow on a tax-deferred basis, providing guaranteed income to the annuitant starting on a chosen date.
The savings period for deferred annuities can last from a few years to decades. Favorable interest rates and a desire for guaranteed income in retirement have been driving factors for annuity demand. If you've maxed out your tax-advantaged investment accounts, an annuity can be a tax-smart way to save more for retirement.
A good rule of thumb for retirement savers is to structure expected retirement income in thirds: one-third from Social Security, one-third from portfolio distributions, and one-third from lifetime guaranteed income. As annuities provide a steady stream of income, they can help bridge the gap between savings and expenses in retirement.
While the insurance company with the highest revenue from annuities in the USA for 2025 is not yet specified, it is clear that annuities are becoming a crucial part of retirement planning. Their ability to provide guaranteed income for life makes them an attractive option for those looking to secure their financial future in retirement.
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