Retirement on your terms: Guaranteed income can help you do it
What does retirement look like to you? Do you want to travel the world? Purchase a vacation home? Or simply enjoy the freedom to live life on your terms?
We all have our own unique retirement dreams. But there’s one goal most everyone has in common—ensuring we can afford the life we want. Guaranteed income can help you do it. Learn what it is, and what your options are for including it in your retirement saving strategy.
What is guaranteed income?
Guaranteed income for life is money you can’t outlive. It essentially replaces some or all of the paycheck you received while employed. Examples include Social Security or an employer-backed pension (which are becoming increasingly rare).
Another example is an annuity. Annuities are insurance contracts you purchase for your retirement income. They’re a way to convert your retirement savings into a steady income stream for life, so you can maintain the standard of living you’re used to—or even enhance it.
How does it work?
You buy an annuity with retirement assets you already have, either with a one-time lump sum or a series of payments. This money is converted into income. Depending on the annuity, you can choose to receive your income payments over a specified number of years, or as a steady stream of income you can’t outlive.
Is it right for me?
Annuities can be a great addition to your retirement saving strategy. Fixed annuities allow your money to grow tax-deferred (similar to a 401(k) or IRA) until you’re ready to take withdrawals or receive guaranteed income payments. This can help you maximize your savings, especially if retirement is still a ways down the road.
There are also immediate income annuities, which turn your retirement savings into income right away. These may be a good option if you’re entering retirement now or in the near future.
Understand your options
There are 4 main types of annuities. The type that may be right for you depends on the level of risk you’re comfortable with, and where you’re at in your retirement savings journey.
- Fixed: Gives you a fixed rate of return on your investment. A good option if you want to save and grow your nest egg, without worrying about market volatility.
- Income: Provides guaranteed income now or in the future. Ideal if you want to ensure you don’t outlive your retirement savings. Or if you’re at or near retirement and want to start receiving income soon.
- Indexed: Lets you invest in the market without the risk of loss. Consider this type of annuity if you want some market growth potential without the risk of losing your investment.
- Variable: Focuses on market growth to help maximize your future guaranteed income. May be the right fit if you want to take advantage of market growth potential, but are OK with the possibility of a loss, too.
Guarantees are based upon the claims-paying ability of the issuing insurance company
Withdrawals prior to age 59 ½ may be subject to a 10% IRS penalty tax.
This document is intended to be educational in nature and is not intended to be taken as a recommendation. Consult with your financial professional to discuss retirement planning.
Before investing in a variable annuity, investors should carefully consider the investment objectives, risks, charges and expenses of the contract and the underlying investment options. This and other information is contained in the free prospectus, and if available, the summary prospectus which can be obtained from your local representative. Please read the prospectus carefully before investing. Contract rider descriptions are not intended to cover all restrictions, conditions or limitations. Refer to rider for full details. Riders subject to state availability and may be subject to an additional charge.
Tax-qualified retirement arrangements, such as IRAs, SEPs and SIMPLE-IRAs are tax deferred. You derive no additional benefit from the tax-deferral feature of the annuity. Consequently, an annuity should be used to fund an IRA, or other tax-qualified retirement arrangement, to benefit from the annuity's features other than tax deferral. These features may include guaranteed lifetime income, death benefits without surrender charges, guaranteed caps on fees and the ability to transfer among investment options without sales or withdrawal charges.
Not FDIC or NCUA insured. May lose value. Not a deposit. No bank or credit union guarantee. Not insured by any Federal government agency Variable Annuities are issued by Principal Life Insurance Company and distributed by Principal Securities, Inc, 800-852-4450, member SIPC and/or independent broker/dealers. Securities sold by a Principal Securities, Inc. Registered Representative are offered through Principal Securities, Inc. Principal Life and Principal Securities, Inc. are members of the Principal Financial Group, Des Moines, IA 50392