How Annuities Work With Your Social Security Income

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Many people rely solely on Social Security for their retirement income, but products such as annuities represent a great opportunity to diversify and live comfortably for years to come.

Although annuities are a great option, there can be confusion between what they entail as opposed to Social Security income.

An annuity is a fund that pays a guaranteed amount each month based on the initial investment you contribute. Social Security payments pay a fixed amount every month – in 2017 they provided an average of $1,360 a month. Both products can last for as long as you live.

You may be able to retire off this money alone, but annuities present an opportunity to maximize your retirement income. When you start your retirement planning, you need to consider many things, from your lifestyle to your savings.

While you contribute to Social Security regularly over the course of your working career, if you have enough to provide upfront, it’s a good idea to invest in your retirement via annuities. However, you need to learn the types of annuities before you invest. There are too many, with varying provisions, and which one you choose will decide your bottom line.

Understanding Social Security Within Your Retirement

Annuities are growing in popularity because of an increase in uncertainty around the Social Security Program. Changes may occur within Federal plans that would impact Social Security participation and benefit allocations.

The Social Security Administration suggests that by 2035 there will be a 23 percent drop in payouts. There’s also reason to believe further decreases will be made in the following years.

The Administration is planning to take action as part of a shift away from Social Security reliance. The goal is to make Americans rely on 401k retirement funds, employer pension plans, and other alternatives. It’s a necessary restructuring, as Social Security payments do not give enough for most retirees to live well.

For anyone under 55 years of age, it appears that Social Security is not something you should assume will exist. Many defend and suggest it won’t ever go away, but you have to be weary, as retirement plans are made on long-term principles.

How Social Security Impacts Annuities

You can use annuities as supplementary payments on top of your typical retirement fund or Social Security payout. If it makes more financial sense to wait and claim your Social Security in full, the annuity payouts can get you by for now.

Since annuities are not seen as income, if you pay into an annuity right before claiming your Social Security, then your monthly income will be greater.

The nearer you are to retiring, the more you will be looking toward fixed-income investment vehicles. This puts you at serious risk, because it only takes a crash in bonds, certificates of deposit, stocks, and so on and you face a big loss.

The idea is that annuities are there to secure a fixed amount of income, something to add to your other investments and the Social Security you’ve been contributing too your whole working life.

How Annuities Add Security to Your Retirement Plan

The stability and low-risk of an annuity investment is what makes it a worthwhile add-on for any retirement plan. If you put down $100,000 into stocks, that amount can go up or down a lot within a year or two. Since you’ll want more funds to live off for your retirement, the closer you get to retirement, the more sensible it is to invest in an annuity.

In essence, by buying annuities, you will be insuring yourself in case the Social Security funds aren’t enough for you to live on comfortably on. This means you won’t have to worry about postponing when you first claim or continue working through old age. Plus, the annuities are inflation-protected. However, the results you get will depend on which annuity you purchase. It’s best to look for one with provisions that fit your needs.

Learn More About Annuities Today

Investing in annuities can ensure you have sufficient income for your retirement. For the younger generation, now is the perfect time to start learning more about annuities. It might be too early to invest, but with the Administration deleveraging the fund, it’s time for new retirement plans.

To truly decide if an annuity is right for you, contact a trusted advisor today.

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