How Does an Annuity Work for Retirement?

Planning for retirement means more than just saving. It’s about making sure you have a steady income that lasts as long as you do. With people living longer and markets staying unpredictable, many retirees worry about running out of money. An indexed annuity can help by providing guaranteed income for life, helping give you more certainty and confidence in your retirement plan.

Why retirement income planning matters

You might retire with a good savings plan, but a market downturn could shrink your balance. Or you could live longer than expected and see your money run out. These situations are more common than many think, which shows why it’s important to have income you can count on for life.

Common concerns include:

• Will my savings last 25 to 30 years?
• How can I protect against market volatility?
• Can I cover essential expenses without sacrificing lifestyle goals?

An indexed annuity helps with these worries by giving you a guaranteed income for life, no matter how the market performs.

Learn more: How a Flexible Retirement Plan Supports Stability

Understanding indexed annuities

An indexed annuity is an agreement with an insurance company that offers:

• Principal protection so your initial investment can be safe from market losses.
• Growth potential, since your earnings are linked to a market index, you can benefit from gains without taking direct market risk.
• Features like a Guaranteed Lifetime Withdrawal Benefit (GLWB) rider provides a steady income for life, regardless of market fluctuations.

Because they offer both security and growth, indexed annuities can be a strong choice for retirement planning.

Benefits of adding an indexed annuity to your portfolio:

1. Lifetime income security

With a GLWB rider, you get a regular paycheck each month. This steady income helps cover essentials such as housing, healthcare and food throughout retirement.

2. Protection during market downturns

Indexed annuities keep your original investment safe from losses, which can help reduce stress when markets are volatile.

3. Flexibility for growth

When your basic income needs are covered, you can worry less about money and have more freedom to invest your other assets to provide for things such as travel or to keep up with inflation.

4. Confidence in your plan

Having a guaranteed income to cover your basic expenses can make your retirement plan more straightforward and help you feel more confident. Do you know how much you need each month? A quick self-check can help you determine how ready you are for retirement.

How indexed annuities fit into a retirement strategy

You can use an indexed annuity as the base of your retirement plan. Put some of your savings into an annuity for guaranteed income and let the rest of your investments focus on growth for things like travel or unexpected costs.

For example, if you need $2,000 per month in today’s dollars for essentials, you could consider an indexed annuity that guarantees this amount for life. This way, you don’t have to depend only on the market.

Additional advantages:

• Healthcare contingencies: Some riders increase income if you have health care needs.
• Tax-deferred growth: You don’t pay taxes on your earnings until you take them out, so your money can grow over time.
• Longevity protection: Annuities give you a steady income for life so that you won’t outlive your retirement savings.

Is an indexed annuity a good fit for you? Now that you know how they work, think about whether one matches your needs and situation.

An indexed annuity is best suited for a diversified plan. Consider factors like:

• Current savings and income sources.
• Lifestyle goals and discretionary spending.
• Health and longevity expectations.

It’s a good idea to work with a financial professional to find the right mix and product for you. This way, you can shape your retirement plan to fit your own goals and situation.

FAQ: indexed annuities and retirement income

1. What is an indexed annuity, and how does it work?

An indexed annuity is an insurance contract that protects your principal and grows in line with a market index, such as the S&P 500. Optional riders can provide guaranteed lifetime income.

2. How can I guarantee income in retirement?

Secure a guaranteed income with an indexed annuity with a Guaranteed Lifetime Withdrawal Benefit (GLWB) rider. You’ll receive a lifetime income, regardless of market performance or your lifespan.

3. What role does an annuity play in retirement income planning?

An annuity provides stability by turning savings into guaranteed lifetime income. This ensures reliable funds for expenses and confidence throughout retirement.

Key takeaways for your retirement plan

Retirement is meant for enjoying life, not worrying about money. Indexed annuities can give you a guaranteed income, may protect you from market losses, and can help you feel more secure about your finances. They can work in conjunction with your other investments to create a comprehensive retirement plan.

Want to see how an indexed annuity could work for your retirement? Learn more about annuity offerings from Ameritas and ask a financial professional for a personalized income illustration to find out how you can set up a guaranteed income for life.

Disclosures

Representatives of Ameritas do not provide tax or legal advice. Please consult your tax advisor or attorney regarding your specific situation.

The index options are not securities; you are not investing in stocks or an index itself. Therefore, credited interest rates do not include dividends paid by companies in the indexes.

Withdrawals of policy earnings are taxable and, if taken prior to age 59 ½, a 10% penalty tax may also apply.

In approved states, annuities are issued by Ameritas Life Insurance Corp. Policy, index strategies and riders may vary and may not be available in all states. Optional riders may have limitations, restrictions and additional charges.