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    Understanding annuity income

    November 8, 2024

    annuity income

    Have you been hearing more about annuities recently? Are you curious about how they could fit into your retirement plan?

    A research study has found an increase in interest about annuities from pre- and post-retirees.

    In December 2023 and January 2024, LIMRA surveyed 759 financial professionals (that were either an investment advisor representative (IAR) or affiliated with an registered investment advisor (RIA) firm)* to find out if their clients are becoming more or less interested in annuity income. The results showed that net interest in annuities is up. 

    In this article, we’ll delve into the various facets of annuity income, including:

    • Benefits of annuity income
    • Factors to consider when choosing an annuity
    • Strategies to maximize your income

    Let’s talk about how annuity income can be a protected, powerful addition to your financial plan.
     

    What is annuity income?

    Annuity income can involve receiving a steady stream of payments over a specific period, commonly during retirement. They are designed to supplement other retirement income sources like your savings, Social Security, or pensions.

    There are different types of annuity income, each offering unique features and benefits, such as:

    • Immediate Annuities: Purchased with a lump sum and providing immediate income payments shortly after purchase.
    • Deferred Income Annuities: Designed to accumulate funds over time, deferring income payments to a future date.
    • Fixed Annuities: Offering constant income payments at a predetermined interest rate throughout the annuity contract term.
    • Variable Annuities: Allowing investment in various options with income payments that vary based on investment performance.

    Your annuity income calculation would depend on factors like annuity type, investment amount, annuitant's age, and prevailing interest rates. Typically, it's determined by the initial investment, the annuitant's life expectancy, and the annuity contract terms.

    At Jackson, we offer a range of annuity products designed to provide reliable and flexible income protection options for retirement. Your financial professional can help guide you in selecting a potential annuity income strategy to match your financial goals and retirement needs.
     

    Benefits of annuity income

    Financial planning for your future is key to ensuring you’ll have the quality of life you want, and annuity income may offer advantages that provide peace of mind and stability. Let's explore those benefits:
     

    The potential for stable and guaranteed income stream

    Certain annuity income can provide a stable income stream. With an annuity, you receive regular payments over a specified period or for life, offering a reliable income source.
     

    Tax advantages

    Some annuity income offers potential tax benefits. Depending on the annuity type, certain contributions and earnings may be tax-deferred† until withdrawal, maximizing savings and potentially reducing tax liability.
     

    Protection against market fluctuations

    Certain annuities can provide protection against market fluctuations, guaranteeing a minimum return rate. This is beneficial during economic uncertainty when market volatility can risk your retirement savings.

    At Jackson, we understand the importance of a secure financial future. Our annuities are designed to provide reliable income streams, tax advantages, and protection against market fluctuations for you. Next time you have a review with your financial professional, ask them if a Jackson annuity would help your overall portfolio.
     

    How to maximize annuity income

    There are several strategies to maximize annuity income:

    Choosing a higher payout option: Annuities offer different payout options, such as fixed period or lifetime payments. Lifetime payments can provide steady income for life, but a shorter fixed period option can result in higher payments. Consider your individual circumstances and financial goals when selecting the right payout option.

    Inflation protection: To protect your annuity income from inflation, opt for an annuity with an inflation protection add-on. This feature ensures your payments increase over time to match rising costs. While initial payments may be lower, long-term security and purchasing power are maintained.

    Understanding surrender charges and fees: Annuities often have surrender charges for early withdrawals. By carefully considering these charges and their impact on your financial goals, you can make informed decisions about accessing your annuity funds.

    We all know it’s important to make informed decisions about your financial future. And as we said, annuities come in various types, each with unique features and benefits – but they’re not right for every situation. Consulting with a financial professional can help you navigate the complexities and choose the annuity that can provide income for your specific needs.

    *These financial professionals possessed a Series 65 or 66—or a dually registered representative who also has a Series 6 or 7.  They could be affiliated with any type of RIA or BD firm as applicable, had a minimum of two years of experience and provide advice to individuals.

    †Tax deferral offers no additional value if an IRA or qualified plan, such as a 401(k), is used to fund an annuity and may be found at a lower cost in other investment products. It also may not be available if the annuity is owned by a legal entity such as a corporation or certain types of trusts.

    Annuities are long-term, tax-deferred vehicles designed for retirement and are insurance contracts. Variable annuities and registered index-linked annuities involve investment risks and may lose value. Earnings are taxable as ordinary income when distributed. Individuals may be subject to a 10% additional tax for withdrawals before age 59½ unless an exception to the tax is met. Add-on living benefits are available for an extra charge in addition to the ongoing fees and expenses of the variable annuity and may be subject to conditions and limitations. There is no guarantee that a variable annuity with an add-on living benefit will provide sufficient supplemental retirement income.

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    Before investing, investors should carefully consider the investment objectives, risks, charges, and expenses of the variable annuity and its underlying investment options. The current contract prospectus and underlying fund prospectuses provide this and other important information. Please contact your financial professional or the Company to obtain the prospectuses. Please read the prospectuses carefully before investing or sending money.

    Jackson, its distributors, and their respective representatives do not provide tax, accounting, or legal advice. Any tax statements contained herein were not intended or written to be used and cannot be used for the purpose of avoiding U.S. federal, state, or local tax penalties. Tax laws are complicated and subject to change. Tax results may depend on each taxpayer’s individual set of facts and circumstances. Clients should rely on their own independent advisors as to any tax, accounting, or legal statements made herein.

    Guarantees are backed by the claims-paying ability of Jackson National Life Insurance Company or Jackson National Life Insurance Company of New York. For variable annuities, guarantees do not apply to the principal amount or investment performance of a variable annuity’s separate account or its underlying investments. They are not backed by the broker/dealer from which this annuity contract is purchased, by the insurance agency from which this annuity contract is purchased or any affiliates of those entities, and none makes any representations or guarantees regarding the claims-paying ability of Jackson National Life Insurance Company or Jackson National Life Insurance Company of New York.

    The latest maturity date or income date allowed under an annuity contract is age 95, which is the required age to annuitize or take a lump sum. Please see the prospectus for important information regarding the annuitization of a variable annuity contract.

    Annuities are issued by Jackson National Life Insurance Company (Home Office: Lansing, Michigan) and in New York, by Jackson National Life Insurance Company of New York (Home Office: Purchase, New York).  Annuities are distributed by Jackson National Life Distributors LLC, member FINRA. These contracts have limitations and restrictions. Jackson issues other annuities with similar features, benefits, limitations, and charges. Contact Jackson for more information.

    Jackson® is the marketing name for Jackson Financial Inc., Jackson National Life Insurance Company®, and Jackson National Life Insurance Company of New York®.