What is Guaranteed Lifetime Income Annuity?

A guaranteed lifetime income annuity can provide you with a lot of great benefits in retirement. Retirement has changed in America. People are living longer and pensions are rare. Add in market volatility, and the questions surrounding social security benefits, and people are feeling stressed and anxious about saving for retirement. However, there are plans you create to give yourself a regular cash flow in retirement – using a guaranteed lifetime income annuity.

A guaranteed lifetime income annuity is a contract with an insurance company. This contract allows you to transform a piece of your retirement savings into a lifetime of predetermined regular payments. To begin, you place funds into the annuity. It’s then, that an insurance company has a contract with you. At this point, the fixed income annuity (FIA) converts the value into set payments that happen over a period of time. Usually, you can set payments to begin once you become 60 years old. However, if you delay your withdrawals, the income payments are often larger.

A guaranteed lifetime income annuity can help protect you against the risk of outliving your retirement savings. That means, no matter how long you live you have the peace of mind knowing you will always receive monthly payments. The monthly amount is guaranteed income and will continue to be paid until you die. The payments associated with a guaranteed lifetime annuity payout eliminates any risk for retirees of outliving their retirement funds.

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With fixed income annuities (FIAs), you collect a series of fixed payments. This happens over a set amount of time. Some fixed income annuities (FIAs) offer extra benefits. For example, if you have an income rider, you could see payment totals increase. This is to help you keep up with inflation and other retirement cost increases. 

To be clear, income riders do have some restrictions. An example is, taking money before you are 59 ½ years old can result in an additional 10% federal tax on your money.

It is important that you understand not only all the benefits but the costs as well. That is why when you work with Cornerstone Wealth Management, we are happy to meet with you to answer all of your questions. Choosing the right options is the key to your future retirement.

Your Choices:

Time Period

Usually, the accrual period is set between 5-10 years. If you follow the terms of the contract, no surrender charges are applied. Your annuity contract’s interest credit is also protected. However, it is possible for you to choose a longer period and this could potentially increase your interest rate. Our team here at Cornerstone Wealth Management is available to help you review all your options. You can join us for our seminars and client meeting. We will help you understand all the details so that you can make an informed choice.

When Do I Get My Income?

There are two main choices for the timeline in which you receive your annuity payments. The first is annuitization payments. If you choose this option, you will receive your income annually. Also, annuitization payments can be partially tax-free. Some of the income may be refunded for what you paid for the annuity. The other part may be taxable because of the interest that you have earned. The second option is income withdrawals. This means that withdrawals under the annuity are fully taxable until the interest you have earned is taxed, then you withdraw what you paid for the annuity tax-free. However, it is always a good idea to speak with your tax advisor before making your choice

How Much
Will I Receive?

You can control how much money you receive in retirement with a fixed index annuity. During the accumulation stage, your money will grow. Once you have passed the waiting period you can begin to receive payments. Your contract will go over the details of the payment schedule set up. You should work with a qualified insurance advisor to see if the benefits of a guaranteed lifetime income annuity are right for you.

Protect for More Than Just Life

If you happen to pass away before you begin to receive your scheduled annuity benefits, your beneficiary will receive a death benefit. Also, in some cases, even if you pass away after you have started to receive payments from your annuity, there is still a possibility that they will still receive a death benefit. Your beneficiary can receive this money as one lump sum, or in payments. Even retirees who have no plans to access their income from their annuity can choose a fixed index product.

Money For When You Need It Most

The benefit of choice is one of the top reasons retirees choose a guaranteed lifetime income annuity. You aren’t taking a risk if the market dips, the insurance company is. Also, fixed income annuities (FIAs) offer ways to ensure your future. Your beneficiaries can even collect your annuity assets without going through probate. Reach out to our team today and see if a guaranteed lifetime income annuity is your best option in planning for your retirement.

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