Planning Your Retirement Income How fixed immediate annuities can help
TABLE OF CONTENTS Your Retirement 2 Income Sources and Expenses 4 Retirement Income Options 6 Fixed Immediate Annuity Overview 8 Types of Fixed Immediate Annuities 10 Funding Your Annuity 12 Choosing the Right Company 14 Making an Informed Decision 16 1
Your Retirement Maintaining your standard of living and ensuring your savings lasts a lifetime are challenges many people face in retirement. This booklet provides useful information on how fixed immediate annuities can provide dependable, lifelong income to help meet those challenges. 2
For years you planned and saved for retirement. And now that you get to enjoy the freedom that comes with it, the next big decision is how to make your hard-earned savings last. Financial security is a big concern for most people who are retired. The problem is you don t know how long you will live, making retirement more difficult to plan. There are many different options available and it can be a challenge to know what s best for you. One thing s for certain, you want to know the income will be there throughout all of your retirement years no matter how long that will be. This booklet further explains the role a fixed immediate annuity can play in your retirement income plan, to help you make more informed decisions. How long could your retirement last? As life expectancies have increased, your retirement could possibly last 20 years or more. Life expectancy At Age 65 82.7 years old 85.3 years old 75 85 86.0 years old 90.8 years old 87.8 years old 91.9 years old Social Security Administration, estimates from the 2016 Trustees Report. Retrieved from ssa.gov.oact/stats/table4 3
Income Sources and Expenses Start thinking about how much money you ll need in retirement. Take a look at your monthly expenses along with the guaranteed retirement income you can expect. If you find a gap between your guaranteed income and monthly expenses, consider filling it with another income source, such as a fixed immediate annuity. 4
Maintaining a certain standard of living is a concern to a number of retired people.you want to continue enjoying your time and not worrying about how to pay the bills. If you don t plan accordingly, you could run out of money in later years and need to cut back or turn to family members for financial help. On the other hand, you don t want to deprive yourself too early of the lifestyle you enjoy because you re concerned about running out of money later on. Careful planning now can help you make a better decision for the future. Sources of Retirement Income Couples and Non-Married Persons aged 65 or older. 32% Employment Earnings 4% Other Sources of Retirement Income 1 33% Social Security 13% Pensions 10% Interest, Dividends, Investments, and Other Retirement income comes from four major sources: Social Security, pension plans, employment earnings and asset income. 1 Social Security Administration Fast Fact, August 2016 5
Retirement Income Options Because fixed immediate annuities offer guaranteed income for life, they can help protect you from outliving your savings. 6
Fixed immediate annuities as part of your income plan Once retired, many count on Social Security, money from retirement accounts and possibly pensions to pay for monthly expenses and activities. And you may also depend on money you ve set aside in savings for part of your income, so how you invest that money can make a big difference. As you get older, you want to take fewer financial risks. It s generally a good rule to not put all of your funds in more volatile investments to help generate more income. These investments, such as stocks, may give you high returns, but can also cost you big losses and need constant watching. Instead, adding income products to your retirement plan, such as a fixed immediate annuity is one way to help keep your money more secure and get guaranteed lifetime income. This type of annuity can also provide a safe, steady income that never goes down even in the most unstable economy. 7
Fixed Immediate Annuity Overview A fixed immediate annuity can provide dependable income to help cover your essential or discretionary expenses in retirement. 8
What they are A fixed immediate annuity is an insurance product which provides a steady stream of income. It s a way to help protect against the risk of outliving your savings because, once you purchase an annuity, the amount you receive every month is guaranteed to continue for the rest of your life no matter how long you live. How they work The idea is actually quite simple. By purchasing a fixed immediate annuity, you convert a portion of your retirement funds into a regular source of income. To purchase a fixed immediate annuity, you make a single lump-sum payment, called a premium. The money you use can come from any source, such as savings and CDs, or 401(k)s and IRAs. In return, you ll receive a steady monthly 1 income, sent by check or directly deposited into your bank account, from the issuing company for the rest of your life. The amount of lifetime income you receive is based on a number of factors, such as: the premium amount you use to purchase the annuity the type of fixed immediate annuity you choose your age when you purchase the annuity your gender 1 You can also receive payments quarterly, semi-annually or annually. 9
Types of Fixed Immediate Annuities There are many types of fixed immediate annuities offered by insurance companies which guarantee lifetime income. The type you choose depends on your individual situation. 10
Whether you are in retirement or ready to retire, fixed immediate annuities can provide steady income over the years. Here are the most common options: Straight Life Annuity This type of annuity pays a regular income amount for the rest of your life. After you pass away, no payments will be made to a beneficiary. Lifetime Income with Period Certain As with the other types of annuities, this annuity guarantees you income for life. In addition, you choose a certain period of time, usually between 5 and 30 years. If you should pass away during that time, your beneficiaries continue to receive your monthly income checks until the time period ends. Lifetime Income with Cash Refund With the cash refund option, you are assured the money you use to purchase the annuity will not be lost. If you should pass away before receiving the full amount paid in, your beneficiary will receive the remaining balance. Lifetime Income with Annual Increase Option With this option, your regular income payment increases by a certain percentage every year, helping you offset any extra expenses due to inflation. Payments under this option may start at a lower rate than options that do not offer an increase. For any of the above annuities, single or joint life options are available. The single life option provides a steady income to you only for the rest of your life. A joint life annuity provides steady, lifetime income for both you and one other person (usually a spouse or domestic partner), until you both pass away. 11
Funding Your Annuity Fund your annuity with a portion of your savings, a CD, or an IRA or 401(k). 12
The money you use to purchase an annuity can come from any number of sources. Those sources include: Checking and savings accounts CDs Brokerage accounts IRAs 401(k)s Pension plan payouts By funding an annuity using money from a tax-qualified retirement account, such as an IRA, 401(k), or lump-sum pension plan payout, you may be able to defer taxes on the money you withdraw. 1 Rather than incur taxes on the entire withdrawal amount, you ll only pay taxes over time on the monthly income you receive from your annuity. Additionally, if you are age 70 and use money that hasn t been taxed to make a purchase, the monthly income payments you receive from the annuity will most likely satisfy the IRS s minimum withdrawal requirements each year. REMEMBER: The money you use to purchase an annuity is locked into a contract and will only be returned in the form of scheduled income payments. However, you may be able to access some portion of your future payments depending on the type of funds you use to make a purchase. 2 1 Please consult your tax advisor for more information. 2 Not available in Oregon and New Jersey. 13
Choosing the Right Company It s always a good idea to take some time to research the company you will entrust with your money. 14
When you re looking to purchase an annuity, remember that the annuity is only as strong as the company that stands behind it. Their financial strength and how long they ve been in business can make a difference. By purchasing a fixed immediate annuity through the AARP Lifetime Income Program, you can rest easy knowing your income is 100% guaranteed by New York Life Insurance and Annuity Corporation, a wholly owned subsidiary of New York Life Insurance Company. New York Life Insurance and Annuity Corporation has the highest possible ratings for financial strength currently awarded to any life insurer from the leading independent rating services: A++ Superior A.M. Best (Highest rating) AAA Exceptionally Strong Fitch (Highest rating) AA+ Very Strong Standard & Poor s (Second-highest rating) Aaa Exceptional Moody s Investor s Service (Highest rating) Ratings as of 02/01/17 15
Making an Informed Decision At New York Life, we re dedicated to providing the information and assistance AARP members need to make informed decisions that will help shape their retirement. That s why we re available by phone to answer your questions about this annuity, so you can decide if it s right for you. 16
Let us help. We want to ensure you receive the personal assistance you need when it comes to your retirement. We re available to answer your questions about income annuities and further explain how one works. You can also request a no-obligation quote to find out what your guaranteed monthly income could be. We re here to help. Call New York Life at 1-800-481-3414 or visit www.nylaarp.com/annuities 17
This material is general in nature and is being provided for informational purposes only. It was not prepared, and is not intended, to address the needs, circumstances and/or objectives of any specific individual or group of individuals. New York Life and its affiliates are not making a recommendation to purchase any specific products. For advice regarding your personal circumstances, you should consult with your own independent financial and tax advisors. The AARP Lifetime Income Program is underwritten by New York Life Insurance and Annuity Corporation (NYLIAC), a Delaware Corporation, Newark, DE 19713. Guarantees are based on the claims-paying ability of NYLIAC. AARP membership is required for Program eligibility. Specific products, features and/ or gifts not available in all states or countries. NYLIAC pays royalty fees to AARP for the use of its intellectual property. These fees are used for the general purposes of AARP. AARP and its affiliates are not insurers. A208-01