Which Annuities Are Best for Seniors?
If you’re going to invest in an annuity, you want to pick the one that best satisfies your retirement goals. Annuities with fixed payments provide consistent, reliable income. A fixed payment can be a good alternative to a bank CD and often comes with a higher interest than CDs.
For seniors quickly approaching retirement, immediate annuities (those with distributions starting within 12 months of signing the contract) can be the best bet. These offer some features similar to a life insurance policy and allow for a choice over the length of the payment term.
Seniors who choose deferred annuities (those with distributions beginning at a later date) can opt to convert these into immediate annuities, which shortens time before receiving payments. If an annuitant has a nice buffer of years before retiring, they use that time to their deferred annuity untouched. This lets the principal money to build interest.
Taxes are a tax benefit for deferred annuities because you don’t have to report the growing incoming until you actually receive distributions. You will owe taxes on money you receive.
Inflation-adjusted payments account for getting the most value from the account over a long period of time. Variable annuities have the potential for payments to increase or decrease based on market fluctuations.
A senior without a pension can turn to annuities as an alternative source of steady income. You won’t risk the investment plummeting in value or owing exorbitant tax fees.
For those with an employer-sponsored retirement plan, qualified annuities are an option. With one specific type – a qualified longevity annuity – you can delay payments until late into retirement. Also, you don’t have to include annuity funds as part of your required minimum distribution, which may reduce your taxes. These annuities guarantee that payments will last your entire lifetime.