If you’re nearing retirement or have already retired, it’s crucial to explore options that provide both preservation of capital and a reliable source of lifetime income. One potential strategy to achieve these goals is to roll over your Individual Retirement Account (IRA) or 401(k) into an income annuity.
An income annuity is a financial product that guarantees a stream of income for the rest of your life or for a predetermined period. By converting your retirement savings into an income annuity, you can protect your capital while ensuring a stable income to cover your living expenses during retirement.
Here are a few reasons why an income annuity could be a suitable choice:
1️⃣ Preservation of Capital: By choosing an income annuity, you can safeguard your retirement savings from market volatility. Unlike investments in stocks or bonds, which may fluctuate in value, an annuity offers a predictable and stable income stream.
2️⃣ Lifetime Income: An income annuity provides a consistent cash flow for as long as you live, ensuring that you won’t outlive your savings. This feature provides peace of mind and financial security, allowing you to enjoy your retirement without worrying about running out of money.
However, it’s important to consider your stage of life and your specific financial goals. If you’re in the earlier stages of your career and still focused on accumulating wealth, an accumulation annuity might be a more suitable option.
An accumulation annuity aims to grow your money over time through potential interest or market-related returns. It allows your retirement savings to benefit from compound growth, helping you build a larger nest egg for the future. This type of annuity can be an excellent choice if you’re looking to maximize your retirement savings and have a longer investment horizon.
Now, let’s briefly touch on how indexing works in the context of annuities:
Indexing, often associated with indexed annuities, is a strategy that allows your annuity’s growth to be tied to the performance of a specific market index, such as the S&P 500. When the chosen index performs well, the annuity’s value increases accordingly. If the index performs poorly, the annuity’s value remains stable or might have a minimum guaranteed return.
Indexing offers the potential for higher returns compared to traditional fixed annuities, but it also carries some level of risk. It’s essential to carefully evaluate the terms, caps, participation rates, and other factors associated with indexing when considering this option.
In summary, when deciding whether to roll over your retirement account into an income annuity or an accumulation annuity, consider your stage of life, financial goals, and risk tolerance. Consult with Us because we provide personalized guidance based on your specific circumstances to help you make an informed decision.