With pension offerings on the decline, you may want to consider a fixed income component to your financial strategy. In short, adding an annuity may be an opportunity to help ensure a portion of your retirement income will be guaranteed.
An annuity is a contract you purchase from an insurance company. For the premium you pay, you receive certain fixed and/or variable interest crediting options able to compound tax deferred until withdrawn. When you are ready to receive income distributions, this vehicle offers a variety of guaranteed payout options — some even for life.
Most annuities have provisions that allow you to withdraw a percentage of the value of the contract each year up to a certain limit. However, withdrawals will reduce the contract value and the value of any protected benefits. Excess withdrawals above the restricted limit typically incur “surrender charges” within the first five to 15 years of the contract. Because annuities are designed as long-term retirement income vehicles, withdrawals made before age 59½ are subject to a 10 percent penalty fee, and all withdrawals may be subject to income taxes.
Planning ahead for retirement is often more complicated than people realize. While it might seem as if you should be in a good financial place, paying into Social Security and a 401(k) for years may not actually provide you with a substantial cushion. Additional guaranteed income may be of help.
With options for job pensions decreasing with each passing year, many people are looking into alternative investments that will provide them with financial stability and security as they head into their golden years. For some, Memphis annuities may pose a feasible solution.
An annuity is actually an insurance policy that is meant to pay out a steady income stream over time. Individuals pay a premium for this product, after which income is dispensed on a regular basis. Income payments from Memphis annuities can be distributed on a monthly, quarterly, or annual basis; in some cases, payment can even be made in the form of a lump sum. Typically, the length of your payment period (along with other factors) will determine the size of your payment(s).
Memphis annuities can be a viable option for retirement planning because they require no annual contribution limit. Therefore, you can put a larger sum of money into this annuity for retirement — and not be taxed for it upon contribution. Your investment will compound every year and can allow you to enjoy a consistent income stream as you age. Keep in mind, however, that early withdrawals come with a penalty feed and withdrawals at any time may be subjected to income tax.
Understanding the best course of action for financial and retirement planning is no easy feat. That’s why Tennessee residents often turn to a trusted advisor who can provide recommendations for Memphis annuities and other types of investments or retirement accounts. To learn more about the valuable financial planning services we offer, please contact Servant Advisors today.