Income annuities may be appropriate for investors in or near retirement because they offer guaranteed income for life or a set period of time. They may allow you to be more aggressive with other investments in your portfolio, since they provide a lifetime income stream.
Keep in mind that you may have limited or no access to the assets used to purchase income annuities.
Immediate variable income annuities offer an immediate income stream with growth potential, which may help keep pace with inflation. This income is guaranteed for life, but the amount of each income payment is not guaranteed-the payment amount will vary based on the performance of the annuity’s underlying investments.
Immediate fixed income annuities offer a guaranteed, predictable payment for life, or for a certain period of time. Your guaranteed income payment cannot be affected by market volatility, helping shield your retirement income from market risk.
A cost-of-living increase is available at an additional cost to help your buying power keep pace with inflation.
Deferred income annuities4 are fixed income annuities that have a deferral period before income payments start. Because of the deferral period, you may get a higher income payment amount than you would from a comparable immediate fixed income annuity with the same initial investment. The cost-of-living increase is also available at an additional cost for deferred income annuities.
Living benefit annuities: for investment protection, income generation, and growth potential
For retirement and other savings goals, many people may be looking to obtain some level of asset protection. These annuities can provide a benefit other than just tax deferral. People nearing or in retirement may be looking to establish downside protection for the long term but still want to participate in the market.
Some deferred variable annuities with guaranteed living benefits provide both guaranteed lifetime income and growth potential, and may offer access to assets as well. In fact, if the account’s investments perform well, the income payments may increase. Those increases are also protected from any later market declines.
Another type of living benefit is one that protects your savings from market downturns while still allowing you to participate in the market’s potential upside. These types of accumulation annuities provide a minimum downside protection, for example, your initial investment amount, while investing in a diversified portfolio that includes equities for portfolio growth over time.