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Jun 09 2025 13:20

National Annuity Awareness Month: A Stable Path to Retirement

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June Is National Annuity Awareness Month

June marks National Annuity Awareness Month, an opportune moment for individuals nearing retirement to delve deeper into annuities amid current financial uncertainties. With market volatility and rising interest rates, understanding how annuities can offer stability might transform your retirement approach.

What Is an Annuity?

An annuity is a financial product that involves paying an insurance company in return for a regular income in the future. This income can span a set period or extend for a lifetime, providing either peace of mind during retirement or legacy planning benefits.

Why Consider an Annuity?

Annuities come with several benefits. They offer lifetime income, essential for those concerned about outliving their savings. Annuities also feature legacy planning options, such as death benefits, ensuring your financial plans continue beyond your lifetime. The tax-deferred growth characteristic of annuities means that your investment has the potential to compound over time, utilizing the “triple tax benefit”—your principal, interest, and tax savings all accrue interest. Additionally, certain annuity types can protect your investments from market downturns.

What Are the Downsides of Annuities?

Annuities are not without flaws. They typically involve high fees such as sales charges, administrative fees, and investment management costs. Potential risks include rising interest rates, the impact of inflation, and the unlikely event of insurer failure, although state guaranty associations provide certain protections. Furthermore, the tax impact cannot be overlooked, with ordinary income tax applicable on withdrawals and severe penalties for early withdrawals.

Are More People Choosing Annuities?

Indeed, annuities are becoming increasingly popular. Annuity sales soared to a record $432.4 billion in 2024, marking a 12% increase from 2023. While projections for 2025 are more tempered, annuities continue to be a valuable diversification tool within retirement portfolios.

The Final Say: Annuities as a Retirement Strategy

While annuities aren't a one-size-fits-all solution, they serve as a potent financial instrument within specific retirement strategies. If you're considering annuities, it's crucial to consult with a financial professional to assess how this product might fit into your overall retirement plan.