Immediate Annuities Vs. Immediate Guaranteed Lifetime Withdrawals

Shawn Plummer

CEO, The Annuity Expert

Understanding Immediate Annuities

Immediate Annuities are like your steadfast friend, always there when you need them. When you purchase an immediate annuity, you pay a lump sum to an insurance company. They promise to pay you a regular income for life or a specified period. It’s like turning a portion of your savings into a steady paycheck.

Benefits:

  1. Security: Offers a guaranteed income stream.
  2. Simplicity: Once set up, it requires little management.
  3. Tax Efficiency: Part of each payment may be tax-free as it’s a return on your original investment.

Drawbacks:

  1. Inflexibility: Once you commit, accessing your lump sum is hard.
  2. No Inheritance: Unless specified, payments usually stop at your death, leaving nothing for heirs.
  3. Inflation Risk: Fixed payments might lose purchasing power over time.

Grasping Immediate Guaranteed Lifetime Withdrawals

IGLWs are the adaptable cousins in the retirement income family. Offered as a feature within certain variable annuities, they allow you to withdraw a certain percentage of your investment annually, guaranteed for life, even if the underlying investment depletes to zero.

Benefits:

  1. Flexibility: Offers the ability to access your investment while still alive.
  2. Potential for Growth: Investment can grow, increasing potential withdrawals.
  3. Legacy Potential: Any remaining balance can be passed to heirs.

Drawbacks:

  1. Market Risk: Withdrawal amounts can fluctuate with investment performance.
  2. Complexity: These products can be more complicated to understand.
  3. Fees: Often come with higher fees compared to immediate annuities.

Comparison Table

FeatureImmediate AnnuitiesImmediate Guaranteed Lifetime Withdrawals
Payment StartImmediateImmediate
Income GuaranteeFor life/Specified periodFor life, regardless of account balance
Investment FlexibilityNoneHigh
Access to PrincipalLimited/NoneYes
Potential for GrowthNoYes
Legacy for HeirsLimitedYes
ComplexityLowHigh
FeesLowerHigher

Conclusion

Deciding between Immediate Annuities and IGLWs depends on your need for security versus flexibility, your desire to leave an inheritance, and your comfort with investment risks. Both options have their unique place in a retirement strategy. Understanding these nuances helps make an informed choice that aligns with your retirement goals. Remember, the right choice balances peace of mind with financial flexibility. Contact us today for a free quote.

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Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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