A recent study found that 54% of Americans indicated they would be willing to sacrifice some savings to purchase guaranteed income in retirement. In the same study, 73% said the disappearance of pensions has made it harder to achieve the American dream.¹

With pension offerings on the decline, you may want to consider a fixed income component to your financial strategy. In short, adding an annuity may be an opportunity to help ensure a portion of your retirement income will be guaranteed.

What is an annuity?

An annuity is a contract you purchase from an insurance company. For the premium you pay, you receive certain fixed and/or variable interest crediting options able to compound tax deferred until withdrawn. When you are ready to receive income distributions, this vehicle offers a variety of guaranteed payout options — some even for life.

Most annuities have provisions that allow you to withdraw a percentage of the value of the contract each year up to a certain limit. However, withdrawals will reduce the contract value and the value of any protected benefits. Excess withdrawals above the restricted limit typically incur “surrender charges” within the first five to 15 years of the contract. Because annuities are designed as long-term retirement income vehicles, withdrawals made before age 59 ½ are subject to a 10% penalty fee, and all withdrawals may be subject to income taxes.

¹ Tyler Bond, Dan Doonan, Kelly Kenneally. The National Institute on Retirement Security. February 2021. "Retirement Insecurity 2021: Americans' View of Retirement." https://www.nirsonline.org/wp-content/uploads/2021/02/FINAL-Retirement-Insecurity-2021-.pdf. Accessed Aug. 17, 2022.