When it comes to retirement planning products and services, there can be a lot of confusion. Saving for retirement can be enough of a challenge, understanding the solutions shouldn’t be. Below National Life Group presents some of the common misunderstandings and the facts about annuities that your employees face when deciding how to allocate their retirement dollars.
Misunderstanding #1 – I can’t have a Fixed Indexed annuity if I have a 401(k), 403(b) or an IRA.
Fact – Yes you can! Fixed Index Annuities partner well with other retirement savings plans because of their guarantee1 against losing money due to market volatility. When they purchase an annuity with after-tax dollars, they don’t have the same contribution limits like they would with a qualified retirement plan. An annuity can provide income payments for the rest of your life; an income you cannot outlive.
Misunderstanding #2 – I need a lot of money up front to own a Fixed Indexed annuity.
Fact – There are different types of annuities. Some require as little as a $50 ongoing monthly contribution while others have a one-time lump sum amount required.
Misunderstanding #3 – I want an income for my lifetime but I don’t know how long I will live. An annuity isn’t flexible and only can provide an income for a certain period of time.
Fact – An annuity is a financial product that is designed to provide a guaranteed income for life. Annuities can be set up to provide a benefit for a pre-selected period of time like 20 or 30 years, for the lifetime of the annuitant, or for the lifetime of the annuitant and a spouse.
Misunderstanding #4 – I can’t access my money once it is in the annuity.
Fact – You can always access your money from an annuity. However, it may be subject to a contract surrender charge if you access it early. Most annuities do allow for an annual free withdrawal amount that is not subject to any contract surrender charges. Remember, if you are under 59 ½ withdrawals may be subject to a pre-distribution IRS penalty.2
We recognize the challenges in saving enough for retirement. We hope that you now understand that fixed index annuities are sound allocation options for retirement plans. Understanding the solutions you provide to your employees can go a long way in making sure what they save lasts as long as they need it to.
1Guarantees are dependent upon the claims-paying ability of the issuing company.
2All withdrawals made from annuities with pre-tax contributions are taxed as ordinary income. All withdrawals from an annuity purchased with non-qualified monies are taxable as ordinary income only to the extent there is a gain in the policy.
TC91494(0816)3
