retired-couple-understand-annuities

Investing in your retirement: 5 things to know about annuities

Over the past several decades, the Baby Boomer generation has been the backbone of the U.S. workforce, but that’s rapidly changing.

With about 10,000 Boomers turning 65 each day,1 there are now more Boomers who consider themselves retired than not.2

However, not all Boomers who are clocking out for good feel 100% financially prepared for retirement. Consider these statistics from the Bankers Life Center for a Secure Retirement:3

  • Nearly nine in 10 (88%) middle-income Boomers express at least one concern about their retirement, including government decisions on budgets and spending (64%), declining health (56%), not having enough money to pursue their interests (52%) and lack of savings (50%).
  • Seven in 10 (69%) Boomers do not believe or do not know if they have enough money to live comfortably to age 85.
  • Seven in 10 (72%) retired middle-income Boomers say they were not financially prepared when they retired. One in 10 (14%) say they were not financially prepared at all.

If you’re like many Baby Boomers and you feel concerned about the possibility of outliving your retirement savings, then it may be a good idea to invest time in researching and understanding annuities.

What’s an annuity?

An annuity is a financial vehicle that’s designed to help you accumulate money for retirement, protect what you’ve saved, or turn your retirement savings into an income stream. You agree to fund the annuity, either with a lump sum of money or through regular payments. Annuities may seem confusing, but they can be quite simple:

Fund the annuity, either with a lump sum of money or through regular payments.
Your money can accumulate funds through traditional fixed and fixed indexed options.
Begin receiving payments through a variety of income options, including guaranteed lifetime income.

 

Ready to learn more? Here are five important things to understand about annuities:

 

1. Annuities provide financial security.

An annuity offers you a way to protect your retirement savings because your principal is always safe from downside market risk. However, an annuity is only as good as the company that backs it! You need to invest time in researching the company issuing your annuity to ensure it will be around in the future to follow through on payments to you. Before making a decision, look at the longevity, financial strength and stability of the company that’s issuing your annuity. You can rest assured knowing that Bankers Life has been serving America’s insurance needs for over 140 years! In addition, we’re accredited by the Better Business Bureau with an A rating5 as of April 2017, in addition to receiving an A- (Excellent) by A.M. Best Company for our financial strength.6

2. Annuities offer growth potential.

Annuities give you the opportunity to accumulate interest with traditional fixed and fixed indexed options. Here’s a glance at Bankers Life annuity growth potential:

  • Guaranteed Lifetime Income Annuity – Earn interest linked to the S&P 500® with protection from downside market risk. Plus, no fee is charged to the annuity’s account value for the lifetime of the income withdrawal benefit, which means you’ll never experience a loss to your principal from market conditions or fees.
  • Premium Bonus Indexed Annuity – This annuity provides the option to grow your money through a fixed interest rate or potentially earn interested linked in part to the S&P 500®. Or, you can choose to allocate your funds between the fixed rate or index value options. Because you’re not actually participating in the market, your money isn’t at risk of any market downturns.
  • Traditional Fixed Annuity – With this annuity, you can grow your money through a fixed index rate. Your principal is protected from losses because the money in your annuity isn’t affected by market performance.
  • Immediate Annuity – You purchase this annuity with a single lump-sum payment, and then it pays you a guaranteed income stream that begins almost immediately. You can decide if you want to receive guaranteed payments for life or for a specific time period.

3. Some annuities offer tax-deferred interest accumulation.

Our Traditional Fixed Annuity offers the benefit of tax-deferred income. This means that under current tax law, the interest your annuity earns accumulates on a tax-deferred basis. While your annuity is earning interest and you’re not withdrawing money, you don’t pay taxes on interest. You only pay taxes when you take money out of your annuity, or you start receiving payments. Because you’re not paying taxes on the gain of your annuity while it’s growing, you can build more funds, faster, to use during your retirement.

4. Annuities offer a variety of income options.

It’s worth investing time in researching the best annuity income option for you. Immediate annuities begin paying almost immediately, while others feature a growth period before you begin receiving payments. Some annuities offer payments for a specific period of time, while others allow you to receive guaranteed payments for life. The Bankers Life Guaranteed Lifetime Income Annuity gives you the option to elect a predictable, guaranteed income stream for life. The longer you wait to begin receiving your income payments, the greater your payments may be. With this annuity, you can feel secure, because you can receive lifetime payments, even if they deplete the account value!

5. Annuities may provide beneficiary-friendly money.

An annuity may help your heirs avoid the time-consuming and expensive probate process that can reduce their inheritance and delay estate distribution. In most cases, upon death of the annuitant, annuity funds pass to a properly named beneficiary without the delays and costs of probate.4

Is an annuity right for you?

When investing time in planning a comfortable retirement, annuities may be an optimal way to ensure your long-term security. A Bankers Life agent/producer can help you determine if an annuity is right for you. Get started by scheduling an appointment today!

 

1Forbes, Social Security Feels Pinch As Baby Boomers Clock Out For Good, https://www.forbes.com/sites/greatspeculations/2018/06/21/social-security-feels-pinch-as-baby-boomers-clock-out-for-good/#2fd4e3f34995, June 21, 2018.
2Bankers Life Center for a Secure Retirement, A Growing Urgency: Retirement Care Realities for Middle-Income Boomers, https://www.bankerslife.com/health-and-retirement-study/, 2019.
3Bankers Life Center for a Secure Retirement, Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers, 2016, p. 11.
4Beneificiary must be named person. Listing estate as beneficiary does not avoid probate.
5 BBB Rating: A.  This rating is their opinion of how the business is likely to interact with its customers based on information it is able to obtain about the business, including complaints received from the public. This rating is the second highest of 13 ratings.  For the latest rating, visit: www.bbb.org
6A.M. Best: A- (Excellent). This rating is their assessment of our relative financial strength and ability to meet contractual obligations. This rating is the fourth highest of thirteen ratings. For the latest rating, visit www.ambest.com.

 

Insurers and their representatives are not permitted by law to offer tax or legal advice. The general and educational information here supports the sales, marketing or service of insurance policies. Based upon individuals’ particular circumstances and objectives, they should seek specific advice from their own qualified and duly-licensed independent tax or legal advisors.

These products and its features are subject to state availability and may vary by state.

Annuity policies are underwritten by Bankers Life and Casualty Company.

Annuity Policy form numbers: LA-02P(13), ICC14-LA-03D, LA-06T(13), LA-07G, LA-08N(13), LA-69A

All lines of business in New York underwritten by Bankers Conseco Life Insurance Company.

Annuities are products of the insurance industry and are not guaranteed by the FDIC or any other government agency.

Bankers Life is the marketing brand of Bankers Life and Casualty Company, Medicare Supplement insurance policies sold by Colonial Penn Life Insurance Company and select policies sold in New York by Bankers Conseco Life Insurance Company (BCLIC). BCLIC is authorized to sell insurance in New York.

Administrative office: Chicago, Illinois.

For information and educational purposes only. Does not constitute investment advice or a recommendation.