How much retirement income will I need?
To maintain the same standard of living as you do now, you will need to replace between 70%-90% of your preretirement income. (So, if you make $50,000 a year before retirement, you'll need $35,000 to $45,000 a year.) Click here to calculate how much you should save each month.
What is an annuity? How does it work?
Annuities are long-term, interest-paying contracts, capable of providing you with lifetime income. They are available through insurance companies. Annuities can be a source of immediate and ongoing payments—or you can select a tax-deferred annuity, which allows you to accumulate wealth and defer paying taxes until you begin receiving income at retirement. This helps you accumulate funds faster through the deferral period.
How does it differ from life insurance?
In some ways, you can view annuities as the opposite of life insurance. Where life insurance offers protection to your family should you die "too soon," an annuity places the financial burden on the insurance company should you enjoy a long life.
The two are similar in that insurance companies issue both annuities and life insurance...although banks, savings and loans and other financial institutions can sell annuities.
What is a fixed annuity?
An annuity is a contract issued by an insurance company. You can set aside money to have it grow on a tax-deferred basis for your future use. Fixed annuities feature a locked-in interest rate. For many people, this is a desirable way to build wealth without having to make ongoing investment decisions. For clients who are risk averse, fixed annuities offer the greatest safety. The returns are generally not as great as with higher risk annuities, but the rate of growth is guaranteed-and immune to changes in the marketplace.
What is an indexed annuity?
An indexed annuity is a type of fixed annuity. Don't let the name scare you. It's different from a traditional fixed annuity because your earnings are linked to the performance of an index, like the S&P 500®. But you also get a guarantee. When the market is up, you benefit from averaged gains and if it drops, you don't lose anything.2
2 S&P 500® is a trademark of The McGraw-Hill Companies, Inc., and has been licensed for use by Conseco Services, L.L.C. These annuities are not sponsored, endorsed, sold or promoted by Standard & Poor's, and Standard and Poor's makes no representation regarding the advisability of purchasing these products. Past performance is not a guarantee of future performance. Annuities are designed to provide tax deferral outside of qualified plans. If you are purchasing this annuity to fund a qualified plan, the tax-deferral features are not necessary.
Can I get to my money if I need it?
Keep in mind that an annuity is a long-term retirement vehicle. There are surrender charges if you take your money out before a certain period of time. However, many annuities allow you to take up to 10% of your money per year without being charged for it after the first year.
What are the income options available?
Income options include:
- Income for Life
- Income for Life, for two
- Income for a specific time
- Income for a specific amount
- Income for life and a specific time
What is tax deferral?
Any earnings from your annuity grow on a tax-deferred basis, which means that you don't have to pay any taxes on your annuity earnings until you withdraw the money. So, all of your money keeps working for you without being reduced by annual taxation.
The power of tax deferral
Due to the power of tax-deferred growth, your money has the potential to grow faster than it would in a taxable alternative. If you began with a lump sum of $10,000 at the age of 30, your value in a taxable plan would equal $93,942 (assuming an 8% return) by the age of 70. That same plan tax-deferred would grow to $217,245.
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