Planning for Retirement Income

What Is an Annuity?

An annuity is a contract with an insurance company. You pay in, either all at once or over time, and in return the insurance company agrees to pay you back later, often as a steady stream of income. Many people use annuities to cover everyday expenses in retirement, alongside Social Security and any pension they may have.

How Annuities Work

The Income Phase: When you're ready, you can turn your annuity into regular payments for a set number of years or for the rest of your life.

Some annuities skip the growth phase and start paying income right away.

The Growth Phase: Your money grows tax-deferred, so you don't pay taxes on the growth until you take it out.

Types of Annuities

• Fixed Annuity: Earns a set interest rate for a set period, similar to a CD. A Multi-Year Guaranteed Annuity (MYGA) locks in one rate for the whole term.

• Fixed Indexed Annuity: Interest is linked to a market index, like the S&P 500, up to a limit. Your money isn't directly invested in the market, so a market drop doesn't reduce your account value. In exchange, how much you can earn is capped.

• Immediate Income Annuity: You make one payment and income starts within about a year. Often used to create a "personal pension."

• Deferred Income Annuity: You pay in now and choose a future date for income to begin, which usually means larger payments later.

Important Things to Know

• Annuities are long-term. Most have a surrender period, often several years, when taking out more than a set amount comes with a fee.

• Limited access. Many allow a small penalty-free withdrawal each year, usually around 10%, but they aren't meant to work like a savings account.

• Taxes still apply. Withdrawals of earnings are taxed as ordinary income, and withdrawals before age 59½ may face a 10% IRS penalty.

• Guarantees depend on the insurer. Every guarantee is backed by the insurance company's financial strength and claims-paying ability, which is why choosing a strong company matters.

• Not right for everyone. If you may need this money soon or don't have an emergency fund, an annuity may not be the best fit.

Is an Annuity Right for You?

• Will my Social Security and pension cover my basic monthly expenses?

• Do I worry about running out of money, or about a market drop right before or during retirement?

• Do I have emergency savings I wouldn't put into an annuity?

• How soon might I need access to these savings?

• Is steady income more important to me than growth potential?

Why People Consider Annuities

• Income you can't outlive. Lifetime payout options keep paying as long as you live.

• Protection from market drops. Fixed and fixed indexed annuities aren't exposed to market losses.

• Tax-deferred growth. You don't pay taxes on the growth until you withdraw it.

• Predictability. Knowing what's coming in each month makes budgeting easier.

Annuities are long-term insurance products designed for retirement. Guarantees are based on the financial strength and claims-paying ability of the issuing insurance company. Surrender charges may apply to early withdrawals, and withdrawals of taxable amounts are subject to ordinary income tax and, if taken before age 59½, may be subject to a 10% federal tax penalty. Fixed indexed annuities are not securities and do not directly participate in any stock or equity investment. Dulce Vida Health Advisors offers insurance products only and does not sell securities or provide tax, legal, or investment advice.

Have Questions About Retirement Income?
Every retirement looks different. We're happy to walk through your questions, explain your options in plain language, and help you decide whether an annuity makes sense for you, with no pressure either way.

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