You may remember a time in the near (or maybe distant) past, where there were a series of cartoons that started off with the statement, “happiness is”, and they were followed by a variety of examples, such as:
- A new haircut
- A cup of coffee and some donuts
- A warm puppy
- A new home
- , etc., etc.
Well, it has been observed in articles in the Wall St. Journal*, and other sources, that, when it comes to retirement, happiness is likely to be found in 3 distinct sources:
- Friends and neighbors
- Fixed annuity
Now the “family and friends” source may not have been a surprise to you, but a fixed annuity was likely a source of happiness that you hadn’t considered before. It turns out that happiness, not surprisingly, was derived from knowing that there was a source of money available that could not be outlived, and that it would be sufficient to help meet many of the living expenses that one might experience in retirement.
Sounds appealing, so far.
But what might be examples of “fixed annuities” that would be available in the lives of most working people? It turns out that the primary sources of annuitized income which could be available to most individuals are in the forms of:
- Social Security
- A pension from a former employer
- An annuity
As you may know, everyone who has been in the workforce for 40 quarters (i.e., 10 years or more), will have access to a benefit from Social Security during their lifetime, but not everyone will have a pension available to them. As a result, the only additional retirement income source that could be available in such a set of circumstances would be the supplemental income that would be realized from an annuity.
Although there are multiple types of annuities that could be considered, the purpose of this article is not to try and answer the question of “which annuity should I use?” The purpose of this article is to ask the question: do you think you would be happier in retirement if you knew that many of the basic living expenses that might confront you could be covered by sources of income that you could not outlive?
If so, would that cause you to add an annuity to the “Happiness is……” list that you have?
A fixed annuity is a long‐term, tax‐deferred insurance contract designed for retirement. It allows you to create a fixed stream of income and also provides a fixed rate of return based on the terms of the contract. Fixed annuities have limitations. If you decide to take your money out early, you may face early surrender charges, and withdrawals taken prior to age 59½, may be subject to an additional 10% tax penalty on top of ordinary income taxes. Any guarantees or protections offered by a fixed annuity are subject to the claims paying ability of the issuing insurance company. This material is being provided for informational purposes only and is not a complete description, nor is it a specific recommendation. Prior to making an investment decision, please consult with your financial advisor about your individual situation.