An appealing feature of fixed annuity income may be that it’s easy to under-stand how the amount you’re receiving is calculated. It is based on: The dollar value of the contract when income payments start Interest earnings guaranteed in the contract Annuity tables that project your life expectancy based on your age As a rule of thumb, the larger your contract value and the older you are when you begin to receive income, the larger each payment will be. On the other hand, with a fixed annuity payout, the amount you receive is not indexed to inflation as Social Security payments are. The risk is that your costs will go up, but your income will not. If inflation increases rapidly, as it can, an income that was once adequate may leave you short of cash. And the longer you live, the less far your income is likely to stretch.
When you’re ready to start receiving income from a deferred annuity, all you have to do is ask. You let the annuity company know that you want to convert your contract from accumulation to payout. Depending on your contract, you may have to indicate the payout option you’ve chosen, whether you want a fixed or variable stream of income, and the date you want to receive the first income payment.
You may want to keep working to augment your income. But one of the most persuasive reasons to work after you retire, especially if you’re pushed or enticed to leaving your job sooner than you plan, is needing health insurance until you qualify for Medicare at 65. While some employers cover retired workers, an increasing number don’t or the plan requires large out-of-pocket payments.
You may qualify for coverage under your spouse or partner’s plan, but, if you don’t, you’ll find that the cost of an individual or family policy can be prohibitive, especially if your health is less than perfect. And while provisions of the new healthcare law are designed to help remedy that situation to some extent, finding a new job with good health insurance benefits can be the best solution.
Contributions from the book Planning Retirement Income in this press release are used with permission from Light Bulb Press.