A retirement annuity is a type of investment which provides you with cash flow. There are many different kinds of annuities, and many seniors will choose annuity products because they like the reliability of the income that an annuity can provide. However, before you make the decision that an annuity is right for your purposes, it is important to understand the pros and cons.
Nirenstein, Horowitz & Associates can provide you with help in determining if a retirement annuity is a good choice for you or not. Our legal team offers comprehensive assistance with retirement planning so you can make informed choices about your options and so you can make plans for a more secure future.
We assist you in determining what types of tax advantaged accounts you should invest in, what types of retirement planning can help you to accomplish your goals, how you can make your money last, and how you can protect your assets. A part of the services we provide can include helping you to evaluate retirement annuities and determine if they are right for your investment goals.
How Does a Retirement Annuity Work?
According to Investopedia: “Annuities were designed to be a reliable means of securing a steady cash flow for an individual during their retirement years and to alleviate fears of longevity risk, or outliving one’s assets.”
When you purchase a retirement annuity, the annuity pays out a set amount of money over a period of time, or over the course of your life. Annuities can be structured to pay out for a set number of years, regardless of how long the annuitant lives or they can be set up to pay out until the death of the annuitant. There are fixed annuities, which provide a guarantee of regular payments at certain time intervals, and variable annuities which can provide for larger or smaller payments depending upon how well investments do.
Annuities are sold by investment companies and life insurance providers, and are especially popular among retirees who want to make sure that they have stable income during retirement. However, if you buy a retirement annuity, you need to realize that the annuity is not a liquid investment. The lump sum amount of money you invest in an annuity cannot be withdrawn without substantial withdrawal penalties, if it can be withdrawn at all.
Is a Retirement Annuity Right for You?
There are pros and cons associated with annuities. One of the biggest advantages is that annuities can provide certainty. For seniors who are worried about running out of money as they get older, it can provide a lot of peace of mind to know that you will have guaranteed income coming in and do not have to worry about not having enough money to live on.
Annuities do not have contribution limits like other kinds of retirement accounts, and they alleviate the responsibility of making investment decisions which you would have if you kept your money invested in traditional stocks and bonds. Both of these features can also be attractive to retirees who may want to invest a lot of money but who don’t want to manage that money actively.
There are also downsides of annuities. Annuities are aggressively marketed because annuities generally pay very high commission percentages to agents and advisors who sell them. As a result, you have to research carefully to make sure the annuity you are being sold is actually in your best interests to buy and is not just being pushed to you in order to provide a big commission for the sales person.
Annuities are very illiquid assets, which is another problem for seniors- you cannot get the money out if it turns out that you need it without paying a big withdrawal penalty. You may also be charged an annual fee for your retirement annuity, which can reduce the funds available to you.
Getting Help from A Connecticut Retirement Planning Lawyer
A Connecticut retirement planning lawyer can help you to determine if a retirement annuity is right for you or not. An attorney can help you to evaluate the pros and cons, understand the specific terms of the annuity that you are considering, and make the best choice for your personal financial situation.
Nirenstein, Horowitz & Associates works with people throughout Connecticut who want professional legal advice which can help them to achieve a more secure retirement. Give us a call at 860-548-1000 or contact us online to find out more about the ways in which we can help you to make sure your retirement is as secure as possible.