• 3-Minute Article
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  • Jun 11, 2018

Retirement Tools to Consider for Your Plan

How annuities and life insurance can complement other parts of a financial portfolio.

Questions this article can help you answer:
  • How can annuities strengthen a retirement plan?
  • What does life insurance offer other than a death benefit?
  • Is annuity income tax-deferred?

A key goal of a retirement plan is to ensure someone’s savings will last as long as their retirement does.

That means building a plan that can account for uncertainties such as market volatility and rising life expectancies – today, about 33% of 65-year-olds will live to age 90.1 Fortunately, there are tools that can help strengthen retirement plans by complementing existing saving and investing strategies.

Annuities and life insurance are two products that can provide benefits such as growth opportunities and potential tax advantages. Here is an overview of the role these products can play in a comprehensive retirement plan, along with considerations to help determine if they might be a good fit.

A Look at Annuities

There are different types of annuities. Annuities can add an element of protection in a retirement plan by turning a portion of savings into a stream of guaranteed income – which can be set up to last for either a specific number of years or the rest of your life, and can start right away or on a future date.

In contrast to other future retirement income source that may be tied up in the markets and may take a hit during market downturns, annuities can provide guaranteed monthly income that’s protected from market volatility to help cover everyday expenses like food and housing costs, regardless of market performance.




Some types of annuities allow retirement savings to grow over time – increasing potential future income – while also offering a degree of protection from market drops. This growth is typically tax-deferred, which may be appealing for people who are looking for additional sources of tax-deferred retirement savings beyond accounts such as IRAs and 401(k)s.

Keep in mind that annuities come with fees in exchange for their benefits. Annuities also typically don’t allow owners to withdraw all of their money during the early years without paying penalties, making them a good complement to plans that have other sources of liquidity for cash needs.

For some, putting a portion of your savings into an annuity can be a sound strategy to ensure a steady stream of income and tax-deferred growth potential. Work with a financial professional to determine if an annuity is right for your retirement plan.

A Look at Life Insurance

Life insurance policies are designed to help provide financially for loved ones after you’re gone. But some policies go beyond protection.

Permanent life insurance policies build cash value through the premiums the owner pays. Policy values also have the potential to grow from interest credits, market returns, or dividends. You can access that cash value through loans or withdrawals to cover retirement expenses – such as a large medical bill – while leaving other retirement savings in place. Withdrawals may be tax-free, as long as the amount taken out does not exceed the value of the premiums you’ve paid.3 However, any loans or withdrawals from a permanent life insurance policy will reduce the death benefit, making it important to balance current needs against legacy planning.

The death benefit feature can also provide more flexibility in a financial plan. For example, knowing there’s a plan in place to leave a legacy for loved ones might make you feel more comfortable spending from other accounts.

When added to the savings you already have, these tools can provide protection, growth potential, income, and tax advantages — valuable components of any retirement plan. Talk with your financial professional about the role annuities and life insurance can play in your portfolio.