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If you decide that an income annuity is appropriate for you, what kind should you buy and when? The answer depends on your specific financial and personal situation. Factors to consider include your estimated life expectancy, the amount of savings and guaranteed income you have, and your projected expenses.
To figure out how much income you may need from an income annuity, first add up your basic living expenses, including food, housing, property taxes, utilities, insurance, and uninsured medical costs.
Then subtract your sources of guaranteed income, including Social Security retirement benefits and any pension benefits you expect. Any shortfall is the amount you may want to cover with a payment from a fixed payout annuity. That way your essential expenses will be covered by a stable guaranteed income payment for the rest of your life.
Next, estimate your discretionary flexible expenses, such as travel, recreation, and hobbies. Since these expenses are optional, you can plan to cover them with sources that are less predictable but offer growth potential, such as payments from a variable income annuity or stock investments in other accounts.
If you determine that an income annuity is right for you, your options are to buy one all at once or buy multiple annuities at different times. For instance, you can buy an annuity when you retire and another when you’re older. That way if your needs change you’ll have left your options open.
Moreover, the higher interest rates are when you buy an income annuity, the more monthly payment amount you can buy with your savings. So by buying at different times you may catch a time when interest rates are higher. On the other hand, interest rates may fall while you’re waiting to buy another annuity, and buying and maintaining more than one annuity will cost you additional fees.
Article is for educational purposes only and is not intended to provide specific tax or legal advice. For answers to tax questions, please see your tax professional. For legal questions, consult an attorney.
Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free (800) 369-2862. Nondeposit investment and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution. CBSI is under contract with the financial institution, through the financial services program, to make securities available to members. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America. The Representative may also be a credit union employee that accepts deposits on behalf of the financial institution.
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