All about annuities

Today, Americans are living longer. While that’s great news on the one hand, the challenge facing today’s retirees is how to avoid outliving their income. Those who qualify for Social Security can reasonably expect to receive a benefit for their entire life; the same goes for those who receive a pension benefit.

But for many individuals today, their primary source of retirement income is a contributory retirement plan account, such as a 401(k) or 403(b) plan. With these plans, there is usually no “guarantee” with respect to how long an individual's money will last once withdrawals begin. It all depends on:

• How much money is contributed to the plan over the years (by both the individual and his or her employer, if there is an employer “match”)
  
• How much those contributions have gained value over time (if at all, since it is possible to lose money in these accounts
  
• How quickly the individual withdraws his or her money.

Many who are planning for retirement realize that, in addition to Social Security, they want a source of income they can rely on once they’ve left the workforce - income that can last a lifetime. That's why many individuals turn to annuities. An annuity is a financial product that can provide a steady source of income, with guarantees that can help future retirees be more confident that they’ll have a reliable stream of income they can count on.

An annuity is a financial product that lets an individual turn their annuity premium dollars (i.e., the amount they pay for the annuity) into a stream of income payments. Annuity purchasers need to keep in mind that they are giving up rights to their premium dollars in exchange for the steady stream of income.

That’s why it’s important that an annuity not be bought without giving careful consideration to how it works: what the individual is giving up, and what he or she will gain in return. With certain types of annuities, for example, a refund or “reversal” is not possible once the product has been purchased. Some individuals find that the greatest advantage of an annuity is the fact that, if structured properly, it can provide guaranteed income for their lifetime (or any other period of time they wish).

• Payouts can be selected that will last over one lifetime, two lifetimes, or a specific period of time.
  
• Buyers can choose their income payout frequency - such as monthly, quarterly or annually.
  
• Once a payout frequency and method have been chosen, the amount of guaranteed income usually stays predictable and level over the length of the payout period.

In addition to other sources of income that you may receive during your retirement years, having a guaranteed source of lifetime income may give you the confidence and ability to enjoy retirement the way that it should be enjoyed - doing the things you love without the worry of outliving your money. Only you can decide whether or not an annuity may be right for you. But since an annuity purchase takes careful consideration, it’s important for you to shop with the assistance of a qualified financial professional. He or she can help you learn more about the many types of annuities - and the important role they can play in giving you greater financial security in retirement.

Prepared by The Guardian Life Insurance Company of America. The information contained in this article is for general, informational purposes only. Guardian, its subsidiaries, agents or employees do not give tax or legal advice. You should consult your tax or legal advisor regarding your individual situation. Merkley Wealth Associates is an all female comprehensive financial services firm located in Clive. Ann Merkley can be reached at (515) 457-1286 or ann_merkley@glic.com

Contract guarantees are guaranteed solely by the strength and claims-paying ability of The Guardian Insurance & Annuity Company, Inc.