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Decoding 5 Types of Retirement Annuities

Updated: Dec 15, 2023

a man and a woman outside discussing retirement annuities

Amidst bipartisan legislation paving the way for retirement plan sponsors to embrace annuities as a default option, there's no better time to explore the potential of retirement annuities. Here, we'll decode five distinct retirement annuity types, shedding light on their potential benefits and considerations helping you craft a more secure retirement strategy.

1. A Preferred Choice Among Retirement Annuities is Fixed Annuities

Fixed annuities, a common choice among retirement annuities, provide the security of a steady interest rate, ensuring guaranteed payments during retirement. This option suits investors seeking to preserve their principal, but it's worth noting that fixed annuities do not safeguard against inflation.

2. Diversify Your Annuity Types Portfolio with Variable Annuities

Variable annuities, a diverse category within annuity types, offer flexibility based on your investment choices, presenting the potential for higher returns alongside the risk of losses. Investors with a longer time horizon before retirement and a higher risk tolerance might find variable annuities appealing as part of their annuity types portfolio.

3. Immediate Annuities for Guaranteed Retirement Income

Immediate annuities, such as single premium immediate annuities (SPIAs), commence payouts almost immediately or within a year. With no associated fees, investors can count on guaranteed income. This annuity type often attracts those approaching retirement.

4. Securing Your Retirement Future with Deferred Annuities

Deferred annuities provide income as a lump sum or periodic payments at a future date. They can be fixed, variable, or indexed, with indexed annuities linked to specific market index performance. Deferred annuities offer the advantage of tax-deferred investments, making them a compelling choice for individuals who have maximized their retirement plans.

5. Defined Benefit Annuities Ensure Lifetime Financial Support

Some employer-sponsored retirement plans include defined benefit options that allow distributions in the form of an annuity, ensuring payments throughout your lifetime. This route can be advantageous for individuals aiming to build their retirement assets rapidly.

Unlocking the Potential of Retirement Annuities

While these five retirement annuity types offer distinct benefits and potential risks, grasping their intricacies is essential. If you're ready to make informed decisions about your retirement annuities, contact us today for expert guidance in crafting a tailored retirement plan that aligns with your aspirations.

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