An immediate fixed annuity can be a supplement to a retirement portfolio when used to help cover basic living expenses. Immediate fixed annuities start paying right away. When used correctly, they may help a retiree from outliving their nest egg. With a single premium immediate fixed annuity, you lock in an income stream for your entire life (or a specific number of years, if you choose).
The following are several advantages to an immediate fixed annuity:
1. Security - The annuity provides stable lifetime income which can never be outlived or which may be guaranteed for a specified period(1).
2. Simplicity - The annuitant does not have to manage his or her investments, watch markets, report interest or dividends.
3. Preferred Tax Treatment – The annuity allows you to postpone paying taxes on some of the earnings you’ve accrued in a "tax-deferred" annuity when rolled into an immediate fixed annuity. (Note: The portion attributable to interest is taxable income.)
While the advantages sound positive, the biggest drawback of an immediate fixed annuity is the loss of control of the money invested, i.e. the principal. Once purchased, the investor does not have access to the principal invested. Therefore, any investor must consider leaving enough assets to meet unexpected expenses to allow for quick access to funds if the need arises.
Call a Founders Investment Consultant to see if an immediate fixed annuity may be right for you.
(1) All guarantees are based solely on the claims-paying ability of the issuer.
and investment advisory services offered through Financial Network Investment
Corporation, Member SIPC. Founders
Federal Credit Union and Financial Network are not affiliated. Investment Services is a department of
Founders Federal Credit Union.
Not NCUA Insured - Not a Deposit - May Lose Value - No Credit Union Guarantee - Not insured by any Federal Government Agency.
Withdrawals of taxable amounts and taxable income received from an annuity are subject to ordinary income tax. Withdrawals of taxable amounts taken before age 59 ½ may be subject to a 10% IRS penalty.
This article was written by Keith Benton, CFP with Founders Investment Services Team.