Many of us worry about outliving our money during retirement. Even if you’ve saved diligently and socked away a few million dollars, lifespans are increasing and the cost of living is constantly on the rise. To help combat these concerns, insurance companies have created products to ensure that you won’t outlive your money. The most common of these products? Annuities with living benefit riders.
So what exactly is an annuity? At its most basic level, an annuity is a series of payments. The way it typically works is the owner makes either one or a series of purchase payments during the accumulation phase. Then, at some point in the future, principal and interest are repaid during the distribution phase. Annuities come in many flavors, including fixed, variable, or equity-indexed. Because of the risk involved, we do not offer variable annuities and are not licensed to offer them.
Living Benefit Riders
A guaranteed lifetime income rider is available with many different annuity contracts. It works similarly to a pension or Social Security payment in that the longer you wait to turn it on, the more income you typically receive. If turned on at 65 years old, you can generally get somewhere in the ballpark of 5% of your income base or income value for life. If you wait until you’re 70 or 75, that figure often jumps to 6%. The nice thing about guaranteed income riders is that even if your annuity is fluctuating in the stock market, your retirement income will be guaranteed. In addition, some of the more popular lifetime benefit riders include income doublers that can double income on a guaranteed basis for up to five years if you need home healthcare or skilled nursing care and meet certain requirements.
On the other end of the spectrum, you may have annuities that you don’t plan on using, meaning you don’t need to draw income from them to live. If this sounds like you, we encourage you to start taking distributions, which will include the interest you’re earning each year, pay the income tax, and use the proceeds to buy a life insurance policy capable of creating generational wealth. This is similar to the programs we use to maximize IRA accounts, pension payments, and Social Security payments.
At Howard Kaye, we want to find a solution that works specifically for your needs. If you’re the sort of person that wants the peace of mind of knowing that your retirement income is guaranteed, an annuity with a living benefit rider may be right for you. Contact one of our advisors today at 800-DIE-RICH to learn more.