The Role of Annuity Income in Retirement


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During retirement, you should look for your income to:

  • Support basic cost-of-living increases, like healthcare
  • Withstand market fluctuations
  • Last as long as you need it to, considering the continuing increase in life expectancy

That’s why you should understand how to incorporate creating lifetime income from an annuity in your retirement planning.*

How annuities work

When you have money in an annuity, you can receive cash withdrawals, annuity income payments, or a combination of both when you retire. If you choose lifetime annuity income payments, your assets will be combined with others and you’ll receive income for as long as you live. An insurance company administers the pool using the assets of those who live shorter than expected to provide income for those who live longer than expected. You can choose to receive income annuity payments for the life of one or two people. You can also choose a lifetime payout option that guarantees continuous payments for a set period of time (10, 15 or 20 years).

Choose the best option

To learn which type of annuity and income option makes the most sense for you, consider these 5 steps when selecting an annuity:

Five steps to choosing the best annuity for you

Find your number

An experienced financial consultant can show you different scenarios to help you understand how much guaranteed lifetime annuity income you’ll need to support basic cost-of-living expenses.

These scenarios are based on information you provide — like when you want to retire and how you want to receive income — and additional assumptions, like different expected rates of return.

This information can then be collected into an in-depth report that helps you determine the amount of monthly income you might receive from a lifetime annuity – and compares it to other options.

By understanding how much lifetime annuity income you may need, you’ll be better prepared to address your financial needs as you get closer to retirement.

Please keep in mind that annuities are designed for retirement and other long term goals. If you make a withdrawal before the age of 59 1/2, you may be subject to an additional 10% penalty on earnings, in addition to ordinary income tax.

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Guaranteed retirement income

An annuity can help make meeting your retirement goals simple.

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