Retirement sounds like a great idea, but only in theory. You don’t have to work, you get to travel more, you can hang out with your friends whenever you want, and so on. However, all these dreams remain only dreams for many retirees, as handling one’s expenses after retirement becomes difficult to manage.

According to The Motley Fool, if you want a comfortable retired life, you must have 80 percent of your pre-retirement income. However, this becomes difficult to achieve, especially if you’re not receiving enough benefits from your insurance plan.

Statista data shows that the number of retired workers in the US receiving social security has increased in the past decade. Unfortunately, reliance on one-time insurance payouts isn’t doing most of them any good. Thus comes the need for something a bit more regular. This is where annuities come in.

An annuity plan provides you with a fixed sum of money for the remainder of your life in return for a lump sum payment or a series of installments. It’s basically guaranteed income after you retire.

Therefore, the question is, for fulfilling your post-retirement dreams, what’s better for you, a pension or an annuity? Let’s find out why the answer to that question is an annuity. 

#1 Guaranteed Lifetime Income

According to Annuity Straight Talk, one of the key advantages of an annuity is the provision of a guaranteed lifetime income. With an annuity, you can receive regular payments for the rest of your life, regardless of how long you live. This feature ensures that you will have a consistent income stream, providing the financial stability necessary to pursue your post-retirement dreams.

Having a guaranteed lifetime income from an annuity can alleviate worries about outliving your savings. You can confidently plan and budget for your retirement years, knowing that a steady income will continue to support you. This peace of mind allows you to focus on pursuing your passions, whether it’s traveling, starting a new business, or spending more time with family and friends.

#2 Tax-Advantaged Growth and Deferred Taxes

Another benefit of annuities is the tax advantages they offer. Annuities provide tax-deferred growth, meaning you won’t pay taxes on the earnings until you start withdrawing the funds. This tax deferral can be advantageous, especially during the accumulation phase, as it allows your investment to grow faster without the burden of immediate taxes.

Moreover, annuities are not subject to annual contribution limits like IRAs and 401(k)s, enabling you to save more for retirement. By maximizing your contributions to an annuity, you can potentially accumulate a larger nest egg to support your post-retirement dreams.

#3 Flexibility and Customization

Annuities offer a variety of options to customize your retirement income strategy according to your specific needs. You can choose from different types of annuities, such as fixed, variable, or indexed annuities, depending on your risk tolerance and investment preferences.

Furthermore, annuities often provide flexibility in payout options. You can decide whether you want to receive payments for a specific period or throughout your lifetime. Some annuities even offer options for a joint lifetime income, ensuring that your spouse or partner continues to receive payments after your passing.

#4 Protection Against Market Volatility

Market volatility can be a significant concern during retirement, as sudden downturns can deplete savings. Annuities can provide protection against market fluctuations by offering guaranteed minimum returns or income floors. With these features, even if the markets experience a downturn, you can still count on a certain level of income from your annuity.

Having a portion of your retirement savings in an annuity can provide stability during economic downturns, allowing you to pursue your dreams without being overly concerned about market volatility.

#5 Estate Planning and Legacy

Beyond supporting your own retirement dreams, annuities can also play a vital role in estate planning and leaving a legacy for your loved ones. Annuities often offer death benefit options that allow you to pass on any remaining funds to your beneficiaries after your passing. This can be particularly beneficial if you have specific goals, such as providing for a spouse, children, or grandchildren.

By including annuities in your estate planning, you can ensure that your loved ones are financially protected and able to pursue their own dreams. Annuities provide a way to transfer wealth efficiently and bypass the often lengthy and complex probate process.

Concluding Remarks

In the US, the number of people retiring each year is increasing greatly, according to Pew Research. Most of these retirees will opt for ordinary insurance plans, but these aren’t enough to help them support their life-after-retirement dreams.

That’s because most insurance plans don’t offer guaranteed income and other benefits, as mentioned above. Thus, you have to be the wise one here and see why an annuity is the better option for you and your post-retirement dreams.