Make time your friend when saving for retirement - AnnuityAdvantage expert tells how
MEDFORD, OR / ACCESSWIRE / September 17, 2019 / The Rolling Stones had a big early hit, "Time Is on My Side." So it makes perfect sense their recent US tour was sponsored by the nonprofit Alliance for Lifetime Income.
"Time is both the friend and foe of people saving for retirement and in retirement," says Ken Nuss, CEO of AnnuityAdvantage, an online annuity marketplace. "Annuities work to put time on your side."
When you're saving up for retirement, time is your friend. But in retirement, time can be your enemy. If you live to an advanced age, you could run out of money as expenses and inflation mount over the years. Annuities can provide guaranteed lifetime income so you don't go broke, he says.
When you're working, you're in the accumulation phase. This is when you're saving for retirement. The sooner you start-even if it's just a small amount-the better.
Tax-deferred accounts, including IRAs, 401(k) plans and similar arrangements are the place to start. But they're not the complete answer because of annual limits on contributions. Most people need to also save outside of their qualified retirement plans, Nuss says.
And that's where deferred annuities come into play. While they don't offer a deduction for contributions, they too defer taxes. For as long as you don't remove money from the annuity, the earnings won't be taxed and can accumulate faster. You can contribute as much as you like, Nuss says.
There are several options in deferred annuities during the accumulation stage:
The CD-like multi-year guaranteed annuity pays a set interest for a set period of time, usually three to 10 years. You make a single deposit, and there's no sales charge, so it behaves much like a bank certificate of deposit (CD).
For people who don't mind a fluctuating interest rate in exchange for potentially higher returns, a fixed indexed annuity can be another good choice. This annuity offers the opportunity to get a good portion of the stock market's gains while offering complete protection from loss.
A deferred income annuity is another option. Also called a longevity annuity, it combines tax-deferral with a guaranteed future stream of income.
It defers payments until a future date that you choose. Most buyers choose to start taking payments when they turn 80 or older, Nuss says. You'll know the exact amount of monthly lifetime income you'll receive and the date when it begins.
"By using one or more of the deferred annuities listed here, you can defer taxes for many years and put the power of tax-deferred compounding to work for you," Nuss says. "You put time on your side."
Annuities are the only financial product that can provide a lifetime guaranteed income. They're basically the opposite of life insurance in that they offer financial protection for living to a ripe old age.
If you bought a longevity annuity, you'll know exactly how much income you'll receive during the second part of your financial life, the distribution phase.
If you have an existing multi-year, fixed-indexed or variable annuity, you may choose to annuitize it. You'll convert the cash value into a stream of income guaranteed for whatever period of time you choose, such as 20 years or your lifetime-the most popular option.
"When you're planning to improve your financial future, don't procrastinate," Nuss says. "As Mick Jagger also sang, 'Time Waits for No One.'"
Retirement-income expert Ken Nuss is the founder and CEO of AnnuityAdvantage, a leading online provider of fixed-rate, fixed-indexed and immediate-income annuities. It provides a free quote comparison service. He launched the AnnuityAdvantage website in 1999 to help people looking for their best options in principal-protected annuities.
More information, including updated interest rates from dozens of insurers, is available at https://www.annuityadvantage.com or (800) 239-0356. They're also on LinkedIn, Facebook, YouTube and Twitter.
The Alliance for Lifetime Income offers retirement-income planning tools at https://www.retireyourrisk.org.
Annuity expert Ken Nuss
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