Financial Advice Q&A

Regular Visitor
Posts: 2
Should I annuitize now?
[ Edited ]

My fixed income Annuity is currently paying 4.2%. I'm 70 and wondering if I should annuitize now or receive the 4.2% instead. When should one annuitize if they receive a good non annuitized interest rate?

Posted: 2014-03-06 04:15 AM
Other Answers: 1
Community Manager
Posts: 398

Wow, a 4.2% interest rate is pretty darn exciting in today's environment! However, that's probably not the key factor in determining whether or not it is time to turn your annuity from a tool to accumulate into a stream of income.  As you know, annuitizing turns the money you've accumulated in your annuity into a regular, typically monthly, stream of income. The good news is that you can normally decide if and when you annuitize.  Here are some factors to consider:


Cash flow.  Ideally, in retirement your fixed recurring expenses should be covered by guaranteed income streams like Social Security, military retirement, pensions and income annuities.  Turning your annuity into a stream of income by annuitizing could be a means to ensure your fixed expenses are covered by guaranteed income.  If you don't have a gap between your fixed income and expenses, I'm not sure I'd be in a rush to annuitize.  The key to understand here is that your financial situation and game plan are a primary driver in your decision...not interest rates. 


Guaranteed income vs. flexibility. Leaving your annuity in accumulation or savings mode gives you flexibility in terms of being able to tap into the money whenever you want to cover irregular expenses like a vacation or car purchase.  However, if you are concerned about running out of money annuitizing offers guaranteed income you can't outlive. 


Setting it up.  It's important to evaluate your options if and when you decide to annuitize.  That could mean setting up payments that will last for your lifetime or for that of you, if you're married, and your spouse.  You can also set up payments that will last for your life or for at least a specified period of time--say 15 years. Some contracts allow you to set up payments that are adjusted for inflation or increase over time.  All of these decisions will impact your payment and need to be made in the context of your goals and situation.


The bottom line is that this may be a great time to talk to a financial advisor and determine excactly how your annuity fits into your overall strategy.  If you're interested, give one of our advisors a call at 800-771-9960.  Good luck!





Posted: 2014-03-06 07:17 AM


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