If you’re concerned that you might outlive your retirement savings, using a portion of your money to purchase an immediate annuity might be a solution. With an immediate annuity, you pay the provider a lump sum of cash. In return, you receive guaranteed income payments over your lifetime or for a specified number of years.

Consider the Advantages

An immediate annuity begins paying out money right away. It provides a steady stream of income, so you’ll generally know how much you’re getting and when. Immediate annuities are relatively low risk as long as the issuing company is financially sound. Before you purchase an annuity, check the issuer’s credit rating with a credit rating agency, such as A.M. Best, Standard & Poor’s, or Moody’s.

And the Disadvantages

Using your cash to purchase an annuity means you’ll no longer have access to that money if you need it in an emergency or for some other purpose. You’ll also forgo the opportunity to potentially earn a higher return by investing the money elsewhere. Typically, your heirs won’t benefit from an annuity since it usually ends with your death. And, if the annuity you choose has fixed payouts, over time, the income you receive may be eroded by inflation.

Your Options

A single-life annuity generally pays the largest monthly benefit, but you do have other options. A survivor benefit continues payments until the surviving spouse dies. A term-certain annuity pays income for a specific number of years and passes to your heirs if you die before the term ends. (Payments continue for the remainder of the term.) An inflation rider adjusts payments to keep up with the cost of living.

An immediate annuity can provide an income stream to supplement your other investments. Discuss the advantages and disadvantages with your financial professional before making a decision.

Please be sure to fully understand how the payout options work before choosing an immediate annuity for your retirement. For non-qualified annuities, you may have to pay federal income tax on any earnings you withdraw from the annuity during retirement. For qualified annuities, the entire payment may be taxable. Payments and guarantees are subject to the claims-paying ability of the issuing insurance company.

Copyrighted property of Newkirk Products, Inc. Symmetry has been granted permission to reproduce a portion of this publication through our license agreement with Newkirk. Symmetry Partners, LLC does not provide tax or legal advice and nothing either stated or implied here should be inferred as providing such advice. The information is provided for educational purposes only.

Symmetry Partners, LLC is an investment advisory firm registered with the Securities and Exchange Commission. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Symmetry Partners LLC), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.

Past performance is no guarantee of future results. As with any investment philosophy there is a possibility of profitability as well as loss.


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