As you plan for retirement, it's important to consider what sources of income will be available to you. Most people will be able to collect Social Security, which can provide a portion of what you will need. Many plan to supplement that income with either an employer-backed pension, a 401k/403b plan, IRAs or other tools. Another possibility is an annuity, which is essentially an insurance policy that pays out an income stream in retirement, monthly, quarterly, annually or in a lump sum.
As CNN Money explains, it's important to consider whether you would actually need annuity payments, if your other retirement vehicles are sufficient. While annuities offer the ability to defer taxes on the money you invest, they also tie up that money for the long term. Early withdrawals can bring steep penalties, and your financial flexibility in retirement may be reduced. They also recommend doing the math to determine if your nest egg might run out too soon, which might make an annuity a more attractive option. And they suggest considering whether the guaranteed income from an annuity or the return from other kinds of investments would help you enjoy your retirement more.
To help your viewers/readers/listeners understand more about annuities, talk with insurance agents in your market who offer them, but also with independent financial planners in your area who can compare different strategies for saving and investing that will provide income in retirement.
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