If you’re considering buying one or more annuities, here are some strategies to keep in mind:
- If possible, consider paying a little more (or accepting a little less income) in exchange for having your payouts adjusted for inflation. This is particularly valuable if your annuity might last for several decades, during which time inflation can significantly shrink the buying power of the payments.
- If you’re married, consider buying one or more joint annuities instead of separate ones for each of you. It’s true that you’ll likely get less total income per month spending $200,000 on a joint annuity than if you each bought a $100,000 annuity. But remember that when one spouse dies, a joint annuity will keep paying the full amount to the survivor, whereas the other strategy will leave the survivor with only his or her own annuity income.
- Consider interest rates, because insurers will offer less income in times of low rates and more when rates are high. You might, therefore, delay buying any annuities until rates rise. That offers the added benefit of your being older when you buy the annuity, meaning you’ll be offered greater income as it will be expected to be needed for fewer years. Another option, especially if you’d rather set up at least some annuity income now, is to use the “laddering” strategy. With that, you divide your total planned annuity purchase into chunks and buy installments over time.
- Only buy from highly rated insurers. Remember that an annuity is only as sound as the insurer that sells it. It’s guaranteed income as long as the insurer is solvent. So, don’t just buy from any company. You might even split your purchase between several insurers, to reduce your risk. You can find out how an insurer is rated by calling and asking it or by using a search engine to look for its name along with the name of a rating agency.
- Finally, give deferred annuities special consideration. You might not want to spend a lot on immediate annuities if you have a sizable nest egg and believe it can support you through retirement, but if you buy a deferred annuity that will start paying at, say, age 85, it can provide a little extra support in case your funds are running low late in life. You might even want to buy the deferred annuity while you’re still relatively young, as it will pay you more if there’s a long period between the purchase and payouts starting.
Please let me know if you have any questions. I’m here to help! To your incredible FINANCIAL success! “RETIRE BEFORE YOU EXPIRE”
– SHATEKA Husser