Fixed annuities can be a top security asset for women for the simple reason that women typically live longer than men, resulting in longer retirements and the benefit of having a consistent, steady stream of income they can rely on until they pass away.
If not used wisely in retirement, a 401k can be depleted. However, an annuity is designed to work differently. If you want it to work that way, an annuity provides guaranteed income for life. And you put money into it just like you would any other money market account, such as a 401k.
An annuity investment provides several options. A deferred variable annuity is more aggressive and can provide a higher return on investment, but it also carries the risk of loss. You will continue to receive a fixed, consistent stream of payments that you plan ahead of time. However, because of the aggressive nature of the investment, the money you have invested may suffer a loss in the market. You can, however, win big.
A deferred fixed annuity provides a guaranteed rate of return for a specific period of time. This is the option you would choose if you wanted guaranteed payments until you died. However, because the market is less aggressive, your profits may be less lucrative.
There are riders you can add to your annuity that provide a safety net for your original investment amount, with the investing company replenishing your original investment amount if you lose any in the trading for your annuity during a set term length, such as 10 years.
An annuity’s accumulation and holding of funds are also tax-deferred, similar to a 401k. That is, your invested pool of annuity funds is not included in your annual income. However, once you receive the funds, they will be taxed as regular income. You can, however, structure the amount you receive accordingly.
You select the investment timeframe, as well as whether to make a lump sum or incremental investment. You can also choose the payment output schedule so that you can plan for a consistent, predictable flow of cash until the day you die. Following that, if your annuity was designed to allow it, a beneficiary you have designated will resume receiving payments from the account.
It follows that women, who live longer lives than men, are ideal candidates for an annuity-funded retirement. In fact, investors believe this. Women are more likely than men to benefit from fixed annuities and the security and long-term dependability they provide, according to New York Life.
“Women are making a wise decision by actively ensuring their retirement income needs are met with a fixed annuity,” says Angela Kyle, senior vice president of New York Life’s retirement income security division.
According to a report by New York Life Insurance Co., women make up the majority of fixed annuity customers, accounting for 64% of all clients in 2009.
These fixed annuities provide tax-free savings and a consistent stream of income for the rest of the policyholder’s life. According to the Insurance Information Institute, its benefits can also be designated to a beneficiary for a set number of years.