If you are concerned about not having enough income for your retirement, you are not alone!

Most of us work throughout our lives and continue to save a certain amount for the later phase when we retire! Many times, the saved amount may be just enough to help you lead a comfortable life once you retire. However, there may be a lingering thought- what if you outlive your savings?

The good news is there are various ways to boost your income stream for your retirement! One such option is annuities. If you are not familiar with the concept and unsure of how they can benefit you when you retire, continue reading to learn more.

Safe and reliable income source

Before anything else, it is important to understand what is annuity income? An annuity is essentially a contract between you and your insurance provider whereby you pay the provider a certain amount in the form of a lump sum payment or periodic payments over time. In return, you get a guaranteed return for life or a certain period, depending on the contract.

Annuities are one of the best ways to make your money work for you. Regardless of how the market performs, you get a certain return on your investment. This creates a steady income stream that you can rely on besides the money you may have put aside as savings.

Peace of mind with financial security

You may have been saving money to put into your retirement account so that it helps you spend your life comfortably when you are not working. However, given the recent economic predicament, it cannot be said with certainty whether your accumulated wealth will last you a lifetime.

In such an instance, annuities provide the much-needed stability and economic relief you may need in retirement. Like most people, you may aspire to lead a stress-free retired life with your loved ones and do the things you love but could never find the time for earlier. Purchasing an annuity gives you that peace of mind and the financial freedom to experience comfort and pursue your passions.

Tax advantages

Unlike conventional retirement accounts like the IRA or the 401(k), there is no limit to the amount of money you can put in an annuity. Hence, if you invest in an annuity in the later years of your life, you can even contribute more depending on your capacity. Since annuities allow for tax-deferred growth, it means the more income you put in an annuity, the less portion of your savings will be deducted in taxes.

It is, however, important to note that annuities, like many investment options, are not suited for short-term investment goals. If you choose to withdraw before the maturity period, you may have to pay a penalty fee and your income will also be prone to taxation. Hence, it is important to consider your financial circumstances and financial goals carefully before you purchase an annuity.

Can be customized

Just like other insurance products, annuities are flexible and you can customize them as per your preferences. For instance, you can have add-ons referred to as riders added to your policy to make an annuity contract that is tailored to your specific requirements.

For example, you can add a long-term care rider to your annuity. This may help cover the expenses for services from an assisted living facility or in-home care services.

Similarly, you can also customize your payout options from an annuity. You can opt for a one-time payment option or periodic payments, depending on your requirements.

Safe investment option

Unlike many investment vehicles, annuities are considered a safer option as they are not tied to market fluctuations. Hence, if you have a low-risk tolerance, an annuity may be the ideal option for you.

Moreover, annuities are protected via state guarantee. This is similar to banks providing FDIC-protected bank accounts. This way, even if the insurance company you have purchased the annuity from goes bankrupt, your money is protected.

Final thoughts

As you can see, annuities are a great way to ensure financial security and stability in your retirement! When you have an income safety net, you can live a worry-free life knowing you can provide a comfortable life for yourself and your family.

When purchasing an annuity, it is important to consider your retirement goals and how much you can contribute towards your annuity. At the same time, it is important to start planning for retirement as early as possible. The sooner you start, the better you can plan and contribute towards saving for those golden years.