Many Americans aren’t saving enough for retirement, with some saving nothing at all or starting too late. Even higher-income earners often struggle to save. As a result, many retirees are running out of money, relying on limited income from retirement plans like IRAs and 401(k)s.
Annuities can be a beneficial savings tool for people over 50. These products offer tax-deferred growth, meaning you won’t pay taxes on the income earned as long as it remains within the annuity. This is particularly valuable for long-term savings since it allows your money to compound without being taxed annually. There are different types of annuities, including:
- Multi-Year Guarantee Annuities (MYGAs): These work similarly to a bank certificate of deposit (CD) but offer tax deferral. MYGAs provide a guaranteed interest rate for a set period (e.g., 5 years), and their interest earnings aren’t taxed until withdrawn. With current rates up to 5.55% for five-year products, MYGAs can be an attractive option, especially for those with modest savings, as some start with just $1,000.
- Fixed Index Annuities: These offer both growth potential and protection from market volatility. They tie your returns to a stock market index but guarantee no loss of principal, even if the market declines. Fixed index annuities provide a good way to grow savings while safeguarding against market downturns. The minimum premium for these annuities is usually as low as $5,000.
- Income Annuities: These provide a guaranteed income stream, either for life or for a set period, essentially creating a private pension. For those not yet retired, a deferred income annuity can start paying income at a future date. Immediate income annuities start payments right away, making them useful for retirees who need a steady income.
Each type of annuity offers distinct benefits, such as tax deferral, growth potential, and guaranteed income, making them valuable tools for retirement planning, especially for those over 50. Contact the experts at Wholehan Marketing to learn more about how annuities can be beneficial for your clients!