7 Signs Buying an Annuity Makes Sense for You

Prepared for properly, retirement can be a time when well-laid plans come to fruition, providing the financial foundation for a lifestyle of comfort and leisure. If those are your goals for the next phase of life, you may want to consider if an annuity should be part of your plan. An annuity may provide a good option for saving money and paying yourself during your retirement.

What Makes You a Good Candidate to Buy an Annuity?

1. Age: If you are between the ages of 50 and 64, you are the ideal age to purchase an annuity. By the time you are ready to retire, you will have created a nice nest egg on which you can rely.
2. Savings Status: Annuities are good investments for people who have maxed out their 401 (k) or IRA savings plans. Extra savings can be applied to a long-term annuity that will give you peace-of-mind and financial security throughout your retirement.
3. Tax Bracket: Ideal candidates fall into a higher tax bracket because they can benefit the most from the tax deferment.
4. Wait Time: If you don’t need immediate access to the money. You won’t be able to take money out since it’s designed as a long-term investment.
5. Available Funds: If you have excess income available to invest. An annuity can provide long-term stability, but it is also costly to get started. You may need to pay around 10 percent of the initial investment in fees.
6. Protection Needs: If you need to protect your assets from judgments. The funds in the annuity are protected and cannot be taken from you.
7. Pension-Free: If you are not entitled to a pension and can afford to invest in one lump sum or in monthly payments.

Can Seniors Benefit From Investing in Annuities?

Is it too late to start an annuity to enhance your retirement when you are already retired or preparing to to retire? It is not too late to invest if you are preparing for retirement soon or are recently retired. According to AARP financial expert Jean Chatzky, annuities “are addressing the primary fear that baby boomers in particular seem to have about retirement, which is that they are going to run out of money before they run out of time.”

A report by the U.S. Government Accountability Office (GAO) points out that Social Security payments are not likely to be enough to cover monthly expenses. This is especially true when you consider that 43.1 percent of seniors choose to take their benefits early, thus reducing the amount of the payments. The GAO report also suggests that middle and high class families invest half of their savings in annuities. This option allows retirees to add to their monthly income.

Not everyone is an ideal candidate to buy an annuity. If you have a large line of heirs or are in a low tax bracket, for example, you may not benefit from investing in an annuity. However, if you fit into a higher tax bracket, are a baby boomer, or are in the early stages of retirement, an annuity can help ensure a minimum income for the rest of your life. 

New Retirement can help you craft a customized plan for a retirement worth looking forward to.