What is a Lifetime Annuity?
A lifetime annuity is a financial product designed to provide a stream of income for the remainder of an individual's life. It is often used as part of retirement income strategies to ensure financial stability during retirement years. By converting a lump sum of money into regular payments, a lifetime annuity helps retirees manage the risk of outliving their savings.
Types of Lifetime Annuities
- Fixed Lifetime Annuity: Provides guaranteed payments for life, based on the initial investment and a fixed interest rate.
- Variable Lifetime Annuity: Payments fluctuate based on the performance of a chosen investment portfolio, offering the potential for higher returns but with increased risk.
- Indexed Lifetime Annuity: Ties payment increases to a specific market index, offering a balance between growth potential and protection against market downturns.
Benefits
Lifetime annuities offer several benefits:
- Sustainable Income: Provides regular income that cannot be outlived.
- Financial Security: Reduces anxiety about future financial needs during retirement.
- Tax Deferral: Earnings grow tax-deferred until withdrawal, allowing for better growth potential.
Conclusion
Incorporating a lifetime annuity into retirement planning can be a beneficial strategy, providing peace of mind and financial security throughout one's retirement years.