If you’re worried that the savings in your 401(k) or IRA account may not last your entire retirement, then using part of those funds to purchase an income annuity might be a smart bet. Here are some things to consider if you are thinking about using tax-deferred funds to purchase an income annuity.1

  • You’ll turn part of your savings into a steady income stream. The main benefit of purchasing a fixed income annuity is that, in exchange for your initial purchase amount (the “premium”), you’ll receive a check in a set amount every month for the rest of your life, no matter how long you live. Think of it like a second social security check. A lot of people buy fixed income annuities because they like the idea of having an income they can count on, rather than worrying that they might outlive their savings.
  • You may satisfy your Required Minimum Distribution (RMD). Starting the year you turn age 70 ½, the US government requires that you start withdrawing a minimum amount of money from your taxed-deferred retirement accounts (RMD).2 If you use your withdrawal amount to buy a fixed income annuity, the monthly income payments might satisfy the minimum withdrawal requirements for the funds you use to make the purchase.
  • You’ll take some of the stress out of money management. Budgeting in retirement can be stressful; the loss of a steady paycheck for many folks means that they have to make tough decisions to make ends meet. When you have an income annuity, you could have more money coming in every month than you would have taken out on your own. That means you’ll have steady income to help budget for medical expenses, utility bills, property taxes and other everyday expenses – not to mention lunch with friends, gardening supplies, travel and other leisure activities.

As with any financial decision, you should be sure to weigh all of the pros and cons before you take action. But if you’re like many retirees, an income annuity can give you added peace of mind about your finances, so that you can focus on enjoying your retirement.

Learn more about annuities in the New York Life Learning Center, or call 1-800-313-6841 to have your questions answered by a knowledgeable representative.