In today’s world, financial independence is a stepping stone to women’s empowerment. A critical path to pursuing this independence is having a suitable retirement income. One retirement strategy that may be appropriate is purchasing an annuity that provides a guaranteed stream of income that women can’t outlive. Here, we dive deeper into how annuities can be a key to a woman’s financial independence.
Understanding Annuities
Annuities are long-term contracts with insurance companies that provide a guaranteed income in retirement. They offer a stream of payments on a future or series of dates, resulting in regular income during retirement that one can’t outlive. For this reason, annuities may be a suitable strategy for women to attain financial independence.
How annuities help financial independence
A confident retirement is one of the benefits annuities offer. With longevity risk higher in women due to a longer average lifespan compared to men, annuities that provide a steady income stream for life can help manage the risk of outliving savings. Therefore, by purchasing annuities, women can work toward a constant income flow during their golden years, bringing greater confidence and freedom.
Another reason women lean towards annuities is their ability to combat inflation. Inflation-adjusted annuities automatically increase payouts to match inflation, addressing that the value of the income remains untouched by increasing living costs. This inflation adjustment feature can help women lessen vulnerability caused by rising prices and help manage their finances.
Understanding annuity payment options
Annuities allow women to control their retirement savings by allowing them to determine when annuity payments will begin:
Immediate annuities
Women can convert their savings into guaranteed lifelong income by opting for immediate annuities and starting payments immediately.
Deferred annuities
Deferred annuities provide women the flexibility to continue accumulating wealth and begin receiving income at a later time of their choice.
Tax benefits
Annuities also offer tax benefits, allowing women to grow their investments tax-deferred until withdrawal. Waiting can significantly increase their retirement savings, enabling women to build financial resources for their future retirement.
Death benefits
Annuities offer death benefits to beneficiaries. In the event of the annuity holder’s death, a designated beneficiary can receive a guaranteed sum from the remaining balance. This death benefit feature provides women with additional confidence and financial independence, knowing their loved ones are taken care of financially in their absence.
Tips before investing in an annuity
Annuities may be a suitable retirement savings strategy for women working toward financial independence. Here’s what women should consider before purchasing one:
Tip #1 – Determine how the strategy fits into their overall retirement savings plan.
Tip #2 – Have a financial professional research annuity insurance companies and their strategies to determine which are suitable for your situation.
Tip #3 – Read the fine print to fully understand the annuity fees and riders, which come at an additional cost, before purchasing one.
Tip #4 – Consider if an immediate or deferred annuity is appropriate for your situation.
In conclusion, annuities provide lifelong income, inflation protection, control over savings, tax, and death benefits. A financial professional can help women better understand annuities and whether they are appropriate for their situation.
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.
Investing involves risks including possible loss of principal.
Annuities are suitable for long-term investing, such as retirement investing. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by Fresh Finance. LPL Tracking #565207
Sources:
https://www.annuity.org/annuities/buy/annuities-for-women/
