Income Annuities are the only way for you to convert your savings or other lump sums into a stream of guaranteed payments made for life. Unlike the other two sources of lifetime payments – Social Security and a defined benefit pension plan - where payments are based on your work and earnings history - an annuity is based on the amount of your savings (as a lump sum) you use to purchase the type of annuity you select. An annuity can be your replacement of a paycheck with monthly payments deposited into your savings or checking account.
Most retirement experts believe that individuals with little or no excess savings should be able to meet their essential (non-discretionary) expenses with guaranteed retirement checks from Social Security, any pension and an annuity. If these essential expenses are met, these regular checks should give an individual peace of mind. Any savings that are left over can be used for non-essential and unexpected expenses.
There are important differences between annuities and Social Security including:
- You can provide for annuity payouts to be made to your beneficiary after your death.
- You can access a portion of your annuity’s value in case you need a lump sum withdrawal
- When an annuity is purchased with after tax savings, a portion of each payment is excluded from tax for an initial period generally equal to your life expectancy, all according to IRS tables
- Unlike Social Security with cost of living (COLA) protection, you may have to add to your annuitiy income to keep pace with inflation unless you chose an annuity with COLA
Importantly, there's a competitive marketplace with highly rated insurance companies competing for your business, and there’s significant protection from state insurance guarantee funds.
According to experts, income annuities are underrepresented as a financial asset class for average investors. Why so? Investors are not receiving the education they should be getting about these products, and in many instances are receiving wrong information.
Go2Income was developed as the go-to source for income annuities.
While there are many types of "annuities", the classic product has been around since at least 1917 and is defined as a series of regular monthly payments made by a life insurance company for the life of the individual. So don’t let any negative perception of this broad category get in your way of making a smart decision. These are not deferred annuities, index annuities, or variable annuities.
From a Pension Research Council paper
“An enduring empirical puzzle in the economics literature is why individuals so rarely purchase annuities to insure against length-of-life uncertainty, despite the substantial value that annuities have been shown to provide in standard life cycle models. This paper provides experimental evidence that individuals have difficulty valuing annuities, and this difficulty – rather than a preference for lump sums – can help explain observed low levels of annuity purchases.… Responses by individuals are difficult to reconcile with optimizing behavior under any reasonable parameter assumptions.”
From The Wall Street Journal
“But for those grappling with investment losses, annuities today have an undeniable appeal. At first glance, they offer a way to restore some financial security to what are supposed to be your golden years. There is even evidence that retirees with regular paychecks are happier than those who rely exclusively on 401(k)s to supplement their Social Security.“