Boosting Retirement Savings with a Fixed Annuity: A Case Study

Retirement savings are on Robert’s mind. As a healthy 55 year-old single male, he is trying to make sure that he is truly prepared for the future. His goal is to retire by the age of 68 with enough savings to live comfortably for at least 20 years. He has wisely invested in his company’s 401k program, funded an IRA, and he personally saved $100,000 in his money market account. However, after meeting with his financial advisor and running some projections, Robert finds that he is not happy with how much savings he’ll have at 68. After asking several trusted acquaintances some pointed questions, Robert believes that a fixed annuity will help him best grow his retirement savings.

The $100,000 money market account that Robert has is currently earning 3% interest. After researching annuity products, Robert decides to use his $100,000 to purchase a 10 year fixed annuity with a ten year guaranteed interest rate of 5.5%. While Robert’s savings are in the fixed annuity, they will grow tax-deferred. In the money market account, Robert was required to pay taxes on his interest earnings every year. He’ll be responsible for paying income taxes on his interest earnings from the annuity once he starts making withdrawals, or begins receiving payments, from his annuities.

After 10 years, Robert reassesses his situation. At age 65, he has amassed more retirement savings than he originally planned. The fixed annuity is now worth $170,814; if Robert had left the $100,000 in the money market account, he would only have $134,392, because of the lower interest rate, not to mention the taxes that would be due every year on the money market’s interest earnings. At the end of 10 years, Robert has to decide whether or not to exchange his balance for another fixed annuity, roll his annuity into an immediate annuity or withdraw his money completely.

Because Robert is so near to his retirement goal age of 68, he rolls his fixed annuity over into an immediate annuity. With an immediate annuity, Robert guarantees a monthly income for life. Along with income from his IRA and 401k, Robert realizes that he is set for retirement and he begins to make preparation to retire from working life.

For a free consultation to see if a deferred fixed annuity is right for you, call the Annuity Specialists at 1-800-239-0356. You can also visit AnnuityAdvantage.com to learn more about deferred fixed annuity products.

Interest is based on current rates and subject to change without notice.

Send email to webmaster@annuityadvantage.com with questions or comments about this web site.
Copyright © 2001-2012 AnnuityAdvantage.com