Retirement changes how money flows into your home. Once regular paychecks stop, your savings must last for the rest of your life.
Kiruba Eswaran, CEO of Eleos Life, breaks down how annuities work as the mirror image of life insurance to protect your income.
Step 1: Separate the Two Types of Annuities
Annuities come in two main styles that serve different goals:
– Accumulation Annuities: You pay in once, and the money grows at a locked interest rate for a set number of years.
– Income Annuities: You hand over a lump sum in exchange for regular monthly paychecks that can last for the rest of your life.
Step 2: Compare Annuities to Bank Accounts
Annuities offer tax advantages and guaranteed interest rates that basic savings accounts at a bank do not match. However, taking your money out early carries fees, so these products work best for long-term goals.
Step 3: Understand Payout Options and Guarantees
With standard income annuities, monthly payments stop when you pass away. If you want remaining funds to go to your family or continue for a spouse, you can add guarantees, but these add-ons reduce your monthly check amount.
Step 4: Use Annuities for Growing Savings
Out of the $460 billion put into annuities by Americans last year, roughly 96 percent went into building savings up, while only 4 percent went directly into lifetime income payouts. Most people use them as a stable way to shield growing money from market swings.
To learn more about planning for long-term income, click here.
