Financial Column: Fixed annuities are a solid choice for retirement income – Boyertown Berk Montgomery Newspapers

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For years, Americans have looked to the stock market for help in meeting their long-term retirement needs. Unfortunately, for those near or already in retirement, market fluctuations can sometimes wreak short-term havoc with even the best designed pension funds, 401(k)s and individual retirement accounts. For investors looking for more stability, now may be a great time to consider the benefits of fixed annuity which includes providing a steady stream of income in retirement.

A fixed annuity is a contract made with an insurer in which an individual makes either a lump sum payment or a series of payments and the insurer agrees to pay that money plus interest back in a lump sum, either over a fixed period of time or for as long as the individual lives.

With the guaranteed interest rates of a fixed annuity, investors avoid market volatility. Typically, the insurer supports these guarantees by investing in a well-balanced portfolio of quality corporate bonds, government securities and real estate, leaving the investor with guaranteed retirement income.

Fixed annuities offer:

Guaranteed minimum rate of return. Investors know exactly how much interest their annuity will earn each year.

Tax–deferred growth. Investors won't pay taxes on any of the earned interest until they start to make withdrawals, so their money has the potential to accumulate more quickly than a taxable investment at the same rate.

Flexibility of premiums. One type of annuity, a flexible premium annuity, allows investors to alter the amount and frequency of payments within specified boundaries defined by the insurer and the law.

A fixed annuity can help bring balance to a retirement portfolio that may already hold more aggressive investments like stocks. Equally important, with a fixed annuity, one can choose to receive income one can't outlive. Investors can either choose to receive income over their entire lifetime or for a specified number of years. Fixed annuities may offer many benefits, including:

Guaranteed return of premium payments. Some annuity contracts guarantee that investors will receive no less than the sum of all premiums paid, less any previous withdrawals, if the annuity is surrendered. However, some withdrawals and surrenders may be subject to surrender charges and/or tax penalties.

Access to accumulated value. Many annuity contracts allow investors to withdraw a percentage of the accumulated value each year without incurring surrender charges. With some annuity contracts, investors also can access the funds in the annuity without surrender charges in cases of terminal illness or nursing home confinement. And when investors start taking regular withdrawals in retirement, they can often choose from convenient, tax-advantaged options such as receiving income for life, receiving the interest only or taking a set amount on a regular basis.

Benefits to beneficiaries. Proceeds from an annuity can be passed directly to one's beneficiary, bypassing the time-consuming and costly probate process.

Some things in life should come with guarantees. Retirement is one of them. Fixed annuities may help you maintain your financial independence throughout retirement, regardless of how the stock market performs.

This article was prepared by Thrivent for use by Tri County Area Financial Associate John Lauer. He has an office at 3821 Main Street in Morgantown and can also be reached at 610-286-5986.