How Annuities Can Benefit Your Retirement Years

One specific estate planning tool that often prompts a lot of questions for California estate planning attorneys are annuities – specifically, what are they and what do they do? We’re here to clear up the confusion.

First, here’s a textbook definition of an annuity to set the baseline:

“A specified income payable at stated intervals for a fixed or a contingent period, often for the recipient’s life, in consideration of a stipulated premium paid either in prior installment payments or in a single payment.”

Estate planning lawyers generally consider annuities to be a type of insurance product that clients use as a retirement strategy. Annuities are beneficial because of the way they provide a steady stream of income, which is usually critical during retirement years. These payments are given to you because of an earlier investment you made with the company.

You can invest in two different types of annuities: a fixed annuity that guarantees a certain payout, or a variable annuity where the payout depends on the performance of investments. Either way, you will receive your money back at predetermined times. Payments can be set to be made monthly, quarterly, annually, or as a one-time lump sum.

There are different types of annuities to consider including “immediate” and “deferred” annuities, but you should work with an estate planning lawyer to determine which one is best for you and meets your goals. The different types of annuities pay out at different stages, but no matter what kind of annuity you get, you will want to decide whether it will pay out over your entire lifespan (once you’ve reached a certain age) or if you would rather have it pay out for a predetermined length of time.

There are definite advantages to planning with annuities when it comes to having an income during your retirement years, but there are also drawbacks that you will want to discuss with your estate planning lawyer. One of the biggest drawbacks is that annuities cost a significant amount of money which is why an experienced estate or elder law attorney can help you decide if you will benefit or be hurt in the long run if you purchase an annuity.

If you want more information about how an annuity can help you meet your estate planning goals, or if you currently have an estate plan and want to see how an annuity can fit into it, please contact one of our California estate and elder law offices by calling 800-244-8814 to set up a consultation. 

If you have any further questions about estate planning and strategies to shield your wealth, or if you’d like to have your current asset protection plan reviewed to make sure it still meets your needs, please contact us at one of our offices located throughout the state of California 800-244-8814 to set up a consultation.