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Using Annuities as Part of Your Retirement Planning Strategy

With Baby Boomers retiring at a record rate, income for retirement is a topic that generates much discussion in the over-60 population. Included in those discussions could be ideas for buying annuities for long-term financial goals.

What often happens, during conversations such as this, is many people do not understand how annuities work or whether they are good products for them to consider.

 What is an annuity?

An annuity is a financial contract in which an insurance company makes a series of income payments to you at regular intervals in return for a premium or premiums that you have paid. Annuities are most often purchased for future retirement income. Only an annuity is designed to pay an income that can be guaranteed to last as long as you live.


An annuity is neither a life insurance policy nor a health insurance policy. It’s not a savings account or a savings certificate, and you shouldn’t buy annuities for short-term financial goals.


Your value in an annuity contract is the amount in premiums you have paid, minus any applicable charges, plus any interest your premiums have earned.


How are premiums paid to an annuity?

Annuity premiums can be paid in either one payment for a single premium annuity or in a series of payments for a multiple premium annuity.


For example, when you retire, you may choose to rollover a lump sum from a 401(k) or pension plan to an annuity in order to collect guaranteed monthly payments from it. This would be considered a single premium annuity.


If you decide at a younger age to begin saving for retirement, you might choose to purchase an annuity and make smaller monthly payments into the plan over a period of 20 years.

This would be a multiple premium annuity. Multiple premium annuity payments can be made either on a regularly scheduled basis, or in flexible payments, allowing you to pay as much premium as you want within set limits.

When will I begin receiving payments from my annuity?

  • Immediate annuities begin paying within one year of premium payment, though many actually begin paying within one or two months of receiving a premium payment. Because of this, immediate annuities must be purchased using one large lump sum single premium and cannot be purchased with multiple premiums.
  • Deferred annuities delay payment until a later date specified in your annuity contract (for example, 10 or 20 years in the future). Deferred annuities can be purchased with either a single premium payment or multiple premium payments.


For more general information call 408-680-6508 or visit the retirement section of our website at


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This material is provided for general and educational purposes only; it is not intended to provide legal, tax or investment advice.  All investments are subject to risk.  We recommend that you consult an independent legal or financial advisor for specific advice about your individual situation.