Create More Predictability for Retirement Income
One of the biggest retirement concerns is outliving your savings.
Annuities are insurance contracts that may be designed to help with long-term accumulation, future income, or both, depending on the type of product and contract.
For some retirement strategies, an annuity may help create a more predictable source of income while complementing Social Security, retirement accounts, savings, investments, pensions, and other available resources.
What Is an Annuity?
An annuity is a contract issued by an insurance company. Depending on the contract, annuities may be structured for accumulation, future income, immediate income, or other retirement-planning objectives.
The features of an annuity can vary significantly. Some products emphasize guarantees, some provide market-related growth potential, and others are designed primarily to convert assets into a stream of income.
The right question is not simply “Is an annuity good?” but rather whether a particular annuity fits your goals, time horizon, liquidity needs, risk tolerance, and broader retirement strategy.
Types of Annuities You May Encounter
Fixed Annuities
Fixed annuities generally provide interest credited according to the terms of the insurance contract and may include guarantees for specified periods.
Contract guarantees are subject to the claims-paying ability of the issuing insurance company.
Fixed-Index Annuities
Fixed-index annuities are insurance contracts whose credited interest may be linked in part to the performance of a market index, subject to contract terms such as participation rates, caps, spreads, floors, and other limitations.
They do not represent direct investment in the underlying index.
Variable Annuities
Variable annuities may allow contract values to be allocated among investment options whose values fluctuate based on market performance.
Variable annuities involve investment risk, including possible loss of principal, and are subject to fees, expenses, insurance charges, and securities regulation.
Immediate Income Annuities
Immediate annuities are generally designed to begin providing income relatively soon after the contract is funded, depending on the selected payout option and contract terms.
Deferred Income Annuities
Deferred income annuities are generally designed to begin providing income at a future date selected under the contract.
They may be considered when planning for income later in retirement.
Other Annuity Strategies
Annuity designs, riders, income features, death benefits, and contract options vary by carrier.
The specific product should be evaluated based on the client's needs and the terms of the actual contract.
Using Annuities for Retirement Income
Retirement often changes the financial question from “How much can I accumulate?” to “How will my assets provide income?”
Certain annuity products may be used to create an income stream under the terms of the contract.
Creating Predictable Income
Certain annuity contracts may provide guaranteed income features, subject to contract provisions, elections, limitations, fees, and the claims-paying ability of the issuing insurer.
Complementing Other Income
Annuity income may be considered alongside Social Security, pensions, retirement accounts, investment withdrawals, and other sources of retirement income.
Planning for Longevity Risk
One challenge in retirement planning is that no one knows exactly how long retirement will last.
Living longer than expected can place additional pressure on savings and investment assets, particularly when those assets are being used to support ongoing living expenses.
Can an Annuity Help Address a Retirement Income Gap?
An income gap may exist when expected retirement expenses are greater than the income expected from Social Security, pensions, and other dependable sources.
Estimate Retirement Expenses
Consider housing, food, travel, insurance, healthcare, taxes, and discretionary spending.
Identify Expected Income
Review Social Security, pensions, savings, investments, retirement accounts, and other expected resources.
Evaluate the Difference
If a projected gap exists, an annuity may be one of several strategies considered for generating additional retirement income.
Tax-Deferred Accumulation
Earnings within certain annuity contracts generally receive tax-deferred treatment under current federal tax rules until amounts are distributed, although tax treatment depends on the contract and individual circumstances.
Tax deferral does not mean tax-free growth, and withdrawals may be subject to ordinary income taxation, contract rules, surrender charges, and possible tax penalties depending on the circumstances.
Understand Liquidity, Surrender Charges & Contract Terms
An annuity is generally intended to be a longer-term financial product. Before purchasing an annuity, it is important to understand how easily funds can be accessed and what charges or limitations may apply.
Surrender Charges
Certain annuity contracts may impose surrender charges if withdrawals above permitted amounts are taken during specified periods.
Withdrawal Provisions
Contracts may allow certain withdrawals, but availability, limits, charges, and tax treatment vary.
Income Elections
Certain income elections may affect future flexibility, access to contract value, beneficiary provisions, and other contract features.
Potential Benefits & Tradeoffs of Annuities
Potential Planning Benefits
- Retirement income features
- Tax-deferred accumulation in certain contracts
- Longevity planning
- Principal or interest guarantees in certain products
- Potential death-benefit features
- Additional optional riders, when available
Important Tradeoffs to Review
- Surrender charges
- Liquidity limitations
- Fees and expenses
- Market risk in variable products
- Complex contract provisions
- Tax consequences of distributions
Annuity Product Options
Depending on applicable licenses, appointments, registrations, product availability, and client circumstances, annuity solutions may be available from established insurance companies.
MassMutual offers multiple annuity types for different accumulation and retirement-income objectives, including fixed, variable, fixed-index, immediate-income, and deferred-income annuity solutions.
Who Might Consider an Annuity?
An annuity may be worth evaluating when a person's retirement goals include one or more of the following:
Retirement Income
You want to evaluate ways to create an additional stream of retirement income.
Longevity Planning
You are concerned about the possibility of outliving certain retirement assets.
Income-Gap Planning
Your expected dependable income may not fully cover projected retirement expenses.
Additional Tax Deferral
You want to evaluate whether tax-deferred accumulation may fit within your broader financial strategy.
Diversifying Income Sources
You want to consider an income source that works alongside Social Security, pensions, and investment assets.
Long-Term Planning
You have a longer-term time horizon and understand that annuities may involve liquidity limitations.
An Annuity Is Not Right for Everyone
Annuities can be useful planning tools in certain situations, but they are not automatically appropriate for every investor or retirement strategy.
Before purchasing an annuity, consider:
- Your age and time horizon
- Current and expected retirement income
- Liquidity needs
- Emergency reserves
- Risk tolerance
- Existing investments and retirement accounts
- Contract fees and expenses
- Surrender-charge periods
- Tax considerations
- Other available alternatives
Our Annuity Review Process
Understand Your Goals
Discuss retirement timing, income needs, liquidity concerns, protection goals, and other priorities.
Review Existing Resources
Consider Social Security, pensions, retirement accounts, investments, insurance, and other assets.
Evaluate Available Options
Compare applicable annuity types, product features, guarantees, charges, risks, and limitations.
Make an Informed Decision
Review the applicable contract, disclosures, fees, surrender terms, income features, and other provisions before proceeding.
Annuities & Retirement Income Planning in California
JSSR Insurance Agency is based in Lathrop, California and works with eligible clients who want to better understand annuity and retirement-income strategies.
If you're searching for annuities near me, retirement income planning in Lathrop, or want to learn whether an annuity may fit your retirement strategy, contact our team to start the conversation.
Annuity FAQs
What is an annuity?
An annuity is a contract issued by an insurance company. Depending on the contract, annuities may be designed for accumulation, retirement income, or other long-term financial objectives.
Can an annuity provide income for life?
Certain annuity contracts and income options may provide lifetime income guarantees, subject to the specific contract, elections, limitations, and claims-paying ability of the issuing insurance company.
What is the difference between a fixed and variable annuity?
Fixed annuities generally provide interest or guarantees according to the insurance contract. Variable annuities contain investment options whose values may fluctuate with market performance and involve investment risk.
What is a fixed-index annuity?
A fixed-index annuity is an insurance contract whose credited interest may be linked in part to the performance of a market index, subject to the contract's participation rates, caps, spreads, floors, and other terms. The contract owner does not directly invest in the index.
Are annuities guaranteed?
Certain annuity contracts contain contractual guarantees. The nature and extent of those guarantees depend on the product and are subject to the claims-paying ability of the issuing insurer. Variable investment options are not guaranteed and may lose value.
Are annuities tax-free?
No. Certain annuity earnings generally receive tax-deferred treatment until distributed, but distributions may be taxable. Tax treatment depends on the contract and individual circumstances. Consult a qualified tax professional.
Can I withdraw money from an annuity?
Withdrawal provisions vary by contract. Certain withdrawals may be permitted, but surrender charges, tax consequences, contract limitations, and other conditions may apply.
What are annuity surrender charges?
Some annuities impose charges when amounts above permitted withdrawal levels are taken during specified surrender periods. The amount and duration of those charges vary by contract.
Is an annuity appropriate for everyone?
No. Whether an annuity is appropriate depends on the individual's goals, financial situation, retirement resources, risk tolerance, liquidity needs, time horizon, tax considerations, and available alternatives.
How do I learn more about annuity options?
Contact JSSR Insurance Agency at (209) 701-6900 or submit an online request to begin discussing your retirement-income goals and available annuity considerations.
Make Retirement Income Part of the Plan
Retirement can last many years, and relying on one source of income may not fit every person's financial strategy. Understanding how different income sources may work together can help you make more informed retirement decisions.
Explore whether an annuity may have a role in your broader retirement-income strategy.
JSSR Insurance Agency
16201 S Harlan Rd, Lathrop, CA 95330
(209) 701-6900
JSSR Insurance Agency is an independent insurance agency representing multiple insurance carriers. Coverage availability, eligibility, pricing, limits, and terms vary by carrier and are subject to underwriting. This page is for general informational purposes and does not modify, extend, or guarantee insurance coverage.
Annuity and retirement-planning information presented on this page is for general educational purposes only and should not be considered individualized investment, legal, accounting, or tax advice. Annuities are long-term insurance products and may involve fees, expenses, surrender charges, liquidity limitations, and tax consequences. Guarantees are subject to the claims-paying ability of the issuing insurance company. Variable annuities are securities, involve investment risk, including possible loss of principal, and may only be offered through appropriately registered and licensed professionals. Fixed-index annuities are insurance products and do not involve direct ownership of or investment in the referenced market index. Product availability, features, costs, riders, income options, tax treatment, and eligibility vary by carrier and contract. Consult appropriately qualified professionals regarding your individual circumstances.
