Create Your Own Pension

When should you consider purchasing an annuity? Answer the following questions.

Your Social Security Income?

Before you answer that question, if you aren’t already collecting Social Security, you should find out what your Social Security Income will be when you retire. You can do this by accessing your Social Security account online at SSA.gov. There you can see the different income estimates based upon when you plan on retiring. 

Your Investment Income?

How much can you reasonably expect earn and withdraw from your investments (stocks, bonds, mutual funds, IRA’s, 401K’s)?

Your Estimated Expenses In Retirement?

Now that you know what your estimated Social Security and investment income will be, you need to estimate what your monthly expenses will be during retirement. This can be tricky, but do the best you can.

How Much Of Your Estimated Expenses Do You Want Covered By A Guaranteed Income Annuity?

Determine that amount and you can start estimating when it is best to purchase an annuity and start receiving payments.

Consider this example (meant only for illustration purposes). 

Monthly income needed: $1,500

Current Age: 57

Age you start receiving payments: 67

Annuity Cost: $225,000

Now, let’s say you still want to start receiving payments at age 67, but you are willing to wait till age 67 to purchase an annuity…what will the annuity cost be then? 

Monthly income needed: $1,500

Current Age: 67

Age you start receiving payments: 67 (immediately)

Annuity Cost: $295,000

So, if you wait 10 years to purchase the same annuity, then it will cost you an additional $70,000. 

But, if you keep that $225,000 in your investments (mutual funds, IRA’s, 401K’s) and earn on average 6%, then in 10 years you will have $403,000. Then you could take that $403,000 and purchase the annuity for $295,000 and still have $108,000 left over to do what you want with…or purchase a larger an annuity.

What To Consider

When seriously considering the purchase and ownership of annuity, you must have an idea and a goal for what purpose the annuity is to serve. E.G.

• Do you want income for your life or for the life of the last surviving spouse?
• Or do you want income for a fixed set of years…10 or 20 years?
• What income amount do you want?
• What do you want that income to cover?
• When do you want the income to start…now or future?

So, when should you consider purchasing your annuity? When it makes the most sense to you!

Important Notice: The information published on this web site is first and foremost, educational in nature and is not intended to be a recommendation to purchase an annuity or any specific insurance or financial product. You are strongly urged to consult with financial planning, tax, and legal advisors to determine if an annuity is suitable in your financial situation. Annuities are not deposits of or guaranteed by any bank and are not insured by the FDIC or any other agency of the U.S. government. All annuity guarantees are subject to the financial strength of the insurance company.