Understanding Annuities and what part they play is critical in making sure you are getting the most out of your retirement planning. We have listed 8 crucial questions you need to know to ensure your annuity works hard for you.
Answering these questions could put you on the path to finding the right annuity and help you secure the future you dreamed of. They come in 3 categories so you can zero in on strategies for you and your situation.
First, Let’s Discuss Your Ideal Retirement
Not even the most experienced retirement income planning specialist could tell you how your retirement will look without sitting down and getting to know you. There is no one-size-fits-all solution. Every person, every couple, is different but everyone deserves to have a retirement income plan built around their dreams.
The following questions will get you thinking about designing your retirement.
What Do You Want Your Life to Look Like in Retirement?
Take a minute and think about where you are, what you are doing, who you with. Are you sitting on the beach or perhaps perched on a porch overlooking the mountains?
Close your eyes a minute and picture yourself spending your retirement exactly the way you want. What are you doing? Are you opening that family business you’ve always wanted or have you packed your bags and headed to the airport?
Picturing your retirement years, will give you a much better idea of not only what you want but help you construct a clear path on how to achieve it.
When Do You Want to Retire?
This is a tricky question as we don’t always get to retire when we want, but if you have a clear goal, with the right retirement strategies you can greatly increase your chances of controlling the what and when of your retirement.
More often than not, when you retire will have an enormous impact on the rest of your retirement goals, including when your occupational income will stop, the amount of your monthly Social Security benefit, and how long your savings will last.
How Is Your Health?
Do you expect to live a long time? While you may not want to consider it, will you need dedicated health care at some point? Do you anticipate medical expenses, factoring in rising costs of healthcare, into retirement?
Financially speaking, one of the biggest concerns is the possibility of running short on money before you run short on time. It’s important to prepare your retirement income plan around the possibility of living a long life, as well as factoring in the costs associated with longevity.
Next, The Here and Now
Now that we have a clear picture of what you want your retirement to look like, the second part is to discuss your present financial situation.
The best way to secure the future you want starts with planning for it right now. The answers to these questions will help you understand if your current retirement income strategies will work for you, or if you could benefit from taking a second look into developing a more accurate trajectory and optimized blueprint.
How Does Your Current Planning Stack Up?
Once you’ve mapped out how you want to spend your retirement years, as well as how long you expect to live and what medical costs may crop up down the road, how does the amount you’ll need compare to how much you’ll have available based on your current strategies?
Don’t forget to account for inflation, market instability if applicable, and taxes.
These calculations can be scary and daunting. While it is not necessary, we would recommend you speak with a retirement specialist. For example, with the right annuity suited for your particular goals, you might be pleasantly surprised by the answer to this question.
Do You Need a Strategy to Fill in the Gaps?
After comparing the trajectory of your current path and the path you’d like to be on, are there gaps that a customized annuity strategy could help fill?
One of the great benefits of annuities is that they can provide guaranteed,* continuous income throughout the rest of your life** – meaning that they will continue to help cover that gap in your financial resources with the potential for growth year after year.
Lastly, What’s Your Annuity Doing for You?
Now that we’ve defined what you need from your annuity, let’s talk about whether or not an annuity you’re considering, will serve you the way it should.
Can That Annuity Grow Over Time?
Some annuities have more potential for growth than others. Annuities that provide greater growth potential do sometimes come with more risk. One of the most unique features of some annuities – fixed index annuities, in particular – is their ability to protect your principal while providing you possible growth at the same time.
It’s important to know how much room you want to give your annuity to grow – how much of your retirement funds should be exposed to market loss. This will depend on factors like your current age and how much reliable retirement income you already have set aside.
Are There Penalties Associated with Taking Extra Money From Your Annuity?
In many contracts, you can withdraw up to 10% per year in addition to any regular payouts, after the first year, without penalty.*** Of course, excess withdrawals can impact your future income and any death benefit available for your heirs. In other annuities, there may be charges when withdrawing funds.
It’s important to know as soon as possible what a specific annuity contract will allow you to do. If you think liquidity could be an issue in the future, look for annuities that give you the option for voluntary withdrawals if needed.
Are Your Fees Eating into Your Income?
Every annuity has its own unique mix of fees particular to the insurance carrier offering it and the specific contract and riders you have purchased, but some fee structures can eat into your income more than others. Because fees can often directly affect your annuity paycheck, a thorough understanding of all the associated fees is crucial prior to signing anything.
To make sure you are aware of and understand all the fees associated with your annuity contract, we recommend you talk with a licensed annuity specialist who can help you take a second, closer look before you sign.
Make an Informed Annuity Decision!
There’s nothing more personal than customizing your retirement income plan around your needs and your dreams. When it’s your future on the line, you need the right tools and resources to empower you to make the best decisions for your life.