Income annuities
What they are, how they work, and what to consider before getting an annuity
There are two basic kinds of income annuities: Immediate and Deferred
Immediate annuities:
Start getting income now
Building a retirement nest egg is one thing. Turning it into regular income – and making it last the rest of your life – is a very different challenge. That's why many people use some of their savings to buy an immediate annuity contract. The insurance company takes that lump sum and turns it into a stream of guaranteed1 income payments. Those payments can last the rest of your life or, if you prefer, a set amount of time, such as 10 years.
Deferred income annuities:
Build a future stream of income
If you're not ready to retire, you can purchase an annuity over time and defer income payments until you need them later. You may choose to use a portion of your retirement savings to purchase a deferred income annuity, which can give you more certainty about income in retirement.
Why income annuities are typically written by a life insurance company
A lot of people are concerned about outliving their savings in retirement. But when you purchase an annuity designed to pay income for the rest of your life, you’re transferring that concern (or, as some would say, risk) to the insurance company. If you live to age 100 or beyond, the insurance company takes on a legally binding responsibility to indefinitely maintain the annuity payments specified in your contract. And while some people get far more out of their annuity than they paid in, life insurance companies have the actuarial experience and investment expertise to manage that kind of risk. Of course, you should also make sure your annuity contract comes from an insurance company with high financial strength ratings, and a long history of meeting their obligations
Reasons people choose Guardian for immediate annuities:
Single lump-sum payment
All it takes is one payment to set up a guaranteed lifetime income annuity stream.Guaranteed income1
Guardian immediate annuities let you pick an income period of five years or more or choose to get income for life. And your fixed income payments won’t be impacted by economic conditions or market performance.Opt for the payment schedule that suits you
Choose monthly, quarterly, semi-annual, or annual retirement income payments. But note that once you select a schedule, it may not be changed during the life of the annuity.Increase the income annuity payments you receive
You can purchase a Guardian immediate annuity with a no-cost option to increase your income each contract year by a simple interest amount of up to 5%. Note that your income during the beginning years will be lower than if you had purchased the annuity without this feature. However, income will increase over time and can eventually result in a higher total payout overall.Guardian has been meeting payment obligations for over 160 years
So, you can be confident the income you’re relying on will be there when you need it.
Reasons people choose Guardian for deferred income annuities:
Gain confidence about retiring
From day one, you will know the amount of future lifetime income you'll receive.Eliminate exposure to market risk
Your future annuity payments are unaffected by market performance and can last your lifetime, removing the risk of outliving this income source.Opt to increase your future income
You can purchase additional lifetime income at any time up until 13 months before your income payments are set to start. All amounts will be combined into one payment when you start to receive your annuity income.Guardian consistently earns high financial strength ratings
Independent ratings agencies like Moody’s, A.M. Best, Comdex, and Standard & Poor’s give us high ratings across the board, so you can be confident that we’ll meet our financial commitments.
How to decide whether an income annuity is right for you
Every person's situation is different, but there's a simple way to determine whether to consider an income annuity. First, add up all known regular expenses you'll have during retirement, then subtract other guaranteed income types, like pensions or Social Security. If there's a gap, then consider an income annuity as part of your retirement planning strategy, along with 401(k) plans, pensions, life insurance cash value, and other assets. After all, retirement income annuities are one of the only financial vehicles that can guarantee1 that you won't outlive that stream of income no matter how long you live.
Get help figuring out if an annuity is right for your retirement goals
Connect with a local financial professional who can explain the different options, including fixed annuities, fixed index annuities, and variable annuities, and who can then help you decide what makes sense for your situation.
Things to know about how income annuities work
Things to know about how income annuities work
1. Who guarantees1 annuity income payments?
An annuity is a contract with an insurance company, and their claims-paying ability guarantees your income payments. That's why it's important to buy an annuity from a company with financial strength high ratings (FSRs) from the leading independent rating agencies, like A.M. Best, Comdex, Standard & Poor's, and Moody's. And because your payments may have to continue for decades, look for a company with a long history of meeting their financial obligations. Guardian has earned some of the highest FSRs in the industry and has been meeting obligations since 1860.2
2. What’s the main benefit of an income annuity?
While annuities can provide a number of advantages, perhaps the most important is the fact that guaranteed1 income annuities can ensure you won’t outlive your outcome – even if you live well past 100.
3. Are there any disadvantages to having an income annuity?
While annuities have many advantages, they may not be the best choice for every person or situation. For one, there are limits to how much money you can access if you need more than your monthly income allotment. They can also be somewhat complex, with higher fees than other retirement investment vehicles. Also, if you have another source of ongoing income, such as a lifetime pension, the benefits of an annuity may be redundant.
4. Are there tax advantages3 to income annuities?
Ordinary income tax only applies to each income payment as it’s received, which can provide a potential tax advantage if you're in a lower tax bracket when you begin to receive income payments– such as when you're in retirement. Also, if you use post-tax dollars to buy an income annuity, a portion of each payment is typically considered a non-taxable return of premium. Before making any decisions regarding an annuity, you should seek specific advice from an independent tax, legal, or financial professional.
5. How much should I consider putting into an income annuity?
The answer will be different for each individual, but here’s a popular guideline: consider putting a portion of your savings into an annuity that will provide enough income to cover your fixed costs in retirement. Knowing your fixed monthly income needs are covered can help you spend your other retirement savings with greater confidence.
6. If I die unexpectedly, what happens to the money in my annuity?
As a general example, if you pass away before receiving payments equal to the amount used to buy your income annuity, your beneficiary will get the difference.
7. Are income annuities a good investment?
Every person's situation is different, but the decision to purchase lifetime income annuities has as much to do with guarantees1 as income performance. Other retirement investments may offer (or have a history of generating) higher returns. Still, they typically can't provide a stream of income that's guaranteed to last the rest of your life.
8. How much does a $100,000 annuity pay per month?
Product offerings vary, and several factors can affect monthly income payments – particularly your age (and life expectancy) when you start taking income. However, an analysis of over 1,300 annuity products found that an immediate $100,000 annuity purchased at age 60 can be expected to pay approximately $508/month for the rest of your life. If purchased at age 65, payments go up to $561/month, and at age 70, $613/month.4
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Do you need income now, or later? Learn about immediate and deferred income annuities
What’s the definition of an annuity?
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1All guarantees including the death benefit payments are dependent upon the claims paying ability of the issuing company and do not apply to the investment performance of the underlying funds in the variable annuity. Assets in the underlying funds are subject to market risks and may fluctuate in value. Variable annuities and their underlying variable investment options are sold by prospectus only. Investors should consider the investment objectives, risks, charges and expenses carefully before investing. This and other information are contained in the prospectus or summary prospectus, if available, which may be obtained from your investment professional. Please read it before you invest or send money.
2 Ratings are subject to change and do not apply to the underlying investment options of variable products.
3 Current tax law is subject to interpretation and legislative change. Tax results and the appropriateness of any product for any specific taxpayer may vary depending on the particular set of facts and circumstances. Entities or persons distributing this information are not authorized to give tax or legal advice. Individuals are encouraged to seek specific advice from their personal tax or legal counsel.
4 Annuityexpertadvice.com, How Much Do Annuities Pay? 2023
This material is intended for general public use. By providing this content, The Guardian Life Insurance Company of America, The Guardian Insurance & Annuity Company, Inc. and their affiliates and subsidiaries are not undertaking to provide advice or recommendations for any specific individual or situation, or to otherwise act in a fiduciary capacity. Please contact a financial representative for guidance and information that is specific to your individual situation.
There are no additional tax benefits if you purchase an annuity to fund an IRA or qualified retirement plan. Therefore, an annuity should only be purchased in an IRA or qualified plan if you value some of the other features of the annuity and are willing to incur any additional costs associated with the annuity to receive such benefits.
Withdrawals of taxable amounts from a variable or fixed deferred annuity will be subject to ordinary income tax and possible mandatory federal income tax withholding. If withdrawals are taken prior to age 59½, a 10% IRS penalty may also apply. Withdrawals may also be subject to a contingent deferred sales charge.
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