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How to Use an Annuity to Protect Against Outliving Your Savings

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One of the biggest fears people have when they’re approaching or entering their retirement years is: What if I run out of money?

You’ve worked hard your whole life, you’ve saved, you’ve invested, but with market volatility, inflation, and an increasing life expectancy thanks to medical advancements, retirement can be challenging. Nowadays, it’s more difficult than ever before to properly predict how long your retirement nest egg will truly last. This is where annuities can help ease your worries as you enter retirement. Here at The Lambert Agency, we assist retirees and those nearing retirement age utilize annuities as an exceptionally powerful tool to help protect against outliving retirement savings.

What Is an Annuity?

Essentially, an annuity is a financial product which is offered by insurance companies to provide recipients with a guaranteed stream of income, oftentimes for the duration of their life. Think of annuities as creating your own personal pension plan. You’ll begin by paying a lump sum or series of payments towards your annuity, then the annuity pays you a predictable income over the years according to your terms and risk tolerance.

There are multiple types of annuities to choose from, including:

  • Fixed Annuities – Fixed annuities provide steady, guaranteed interest growth and predictable payments, so you can rest assured you’re going to continue receiving income well into your retirement years.
  • Indexed Annuities – Indexed annuities are linked to a market index, such as the S&P 500, with the benefit of offering downside protection over time.
  • Immediate Annuities – Immediate annuities convert your lump sum contributions into income immediately.
  • Deferred Income Annuities – Deferred income annuities will start your payment schedule at a predetermined future date. This type of annuity is oftentimes used for longevity focused planning.

Here at The Lambert Agency, we walk you through each option and explain the positives and negatives, to help you best determine which annuity fits your overall retirement goals.

How Annuities Help You Avoid Outliving Your Money

  1. Lifetime Income
    Annuities offer multiple payout options which typically last as long as you’re alive. This translates to offering you payments, even if you live beyond 100 years of age. The lifetime guarantee of continued payments is certainly one of the best features of annuities.
  2. Protection From Market Volatility
    If your primary savings vehicle is a 401(k) or IRA, a poor performing market may greatly affect your anticipated income. When you work with The Lambert Agency, we help determine which annuity is the best choice for guaranteed income which is not subject to the ups and downs and swinging volatility often associated with 401(k)s or IRAs tied to market performance.
  3. Predictable Budgeting
    When you know how much money you’re receiving on a regular basis through fixed income streams, it helps make life easier when it comes to budgeting and planning your finances. Everyday expenses and bills such as housing, healthcare, utilities, groceries, etc… are easier to manage without having to worry about not having enough money.
  4. Customizable Options
    There are many customizable options you can incorporate into your annuities. Some of these options consist of everything from inflation-adjusted features and joint payouts for couples. Here at The Lambert Agency, we enjoy assisting our clients with designing their perfect annuity for their lifestyle.

Who Should Consider an Annuity?

Properly selected annuities can be a great fit for:

  • Retirees who don’t have a pension and are seeking out a guaranteed income
  • Individuals or couples who are worried about fluctuating market risk in their retirement years
  • Couples who want a lifetime income stream to continue providing for the surviving spouse, ensuring financial security and stability
  • Anyone who is entering retirement age and values financial peace of mind while not wanting to stress about outliving their savings

Common Concerns About Annuities

“Are annuities expensive?”
Some forms of annuities may carry higher fees than others, yet many modern annuities are quite cost-effective. The Lambert Agency assists you with comparing and contrasting annuities to best determine the annuity which will simultaneously maximize investment value while reducing unnecessary expenses.

“What if I want flexibility with my annuity?”
Specific annuities allow withdrawals, income riders, or lump-sum access, depending on the specific terms and conditions. The best choice you can make is working with a knowledgeable insurance agency such as The Lambert Agency, to best align the right annuity with your lifestyle.

“Do annuities replace my other retirement accounts?”
No, they do not. Annuities are specifically designed to complement your other retirement accounts, such as 401(k)s, IRAs, and various brokerage accounts through the addition of a guaranteed income.

How The Lambert Agency Helps

When you choose to work with The Lambert Agency, you’re going to find we specialize in retirement strategies which balance both income protection and income growth. When it comes down to annuities, we help:

  • Compare and contrast the top-rated annuity carriers and products
  • Properly illustrate income scenarios based on your age, health, and overall retirement goals
  • Fully explain features such as income riders, death benefits, and inflationary protection in easy to understand language
  • Provide ongoing annuity plan reviews so your annuity is continuously aligned with your retirement plans

Contact The Lambert Agency Today

When it comes to actually entering your retirement years, outliving your savings should not be a worry. With the right annuity product and strategy, you’re able to fully enjoy your retirement knowing you have a guaranteed stream of income for the remainder of your life. When you choose to work with The Lambert Agency, we’ll assist you with the various annuity options, select the right carrier, and truly design a proper solution which provides financial security paired with peace of mind.

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What type(s) of insurance are you interested in?
What type(s) of insurance do you currently have?
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Annuity Fees Explained: What You Need to Know Before Buying

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Annuities can be a fantastic way to secure guaranteed income throughout your retirement years. With this being said, there are fees associated with annuities, much like nearly all other financial products on the market. Gaining a better understanding of annuity fees can help you make a more educated decision if you choose to make the decision to invest. Here at The Lambert Agency, we always believe in providing our clients full transparency so you know exactly what you’re receiving, what you’re paying for, and how annuity fees may end up impacting long-term performance.

Why Annuities Have Fees

An annuity is essentially an insurance contract, and the associated fees help to cover the guarantees and benefits the annuity product subsequently provides. An example of this is how fees support a lifetime income rider, death benefit, and account management features. While these associated costs are usually justified in most cases, having a better understanding of the fees and where they’re coming from helps you avoid any and all surprises along the way.

Common Types of Annuity Fees

Below are some of the most common forms of annuity fees:

  1. Mortality & Expense Risk Charges (M&E Fees)
    Mortality & Expense Risk Charges, better known as M&E Fees, help cover the insurance guarantees which are built into an annuity product. These fees are commonly charged as a percentage of account value and will often range from 0.5% to 1.5% annually.

    Ex.: With a $100,000 annuity, an M&E fee of 1% would equal to a $1,000 per year annual fee
  2. Administrative Fees
    Administrative fees are the costs of servicing your annuity. Annuity servicing will often consist of recordkeeping, statement management, and customer support. An administrative fee usually hovers around 0.1% – 0.3% annually.
  3. Investment Management Fees (Variable Annuities)
    If you happen to choose a subaccount, such as a mutual fund housed within a variable annuity, you’ll pay fees which are similar to the expense ratios often found in mutual funds. Investment management fees will vary widely, yet they’re often anywhere between 0.5% – 2%.
  4. Rider Fees
    Many forms of annuities will offer optional add-ons, referred to as “riders”. These riders may consist of guaranteed lifetime income, enhanced death benefits, and various forms of long-term care features. Rider fees will usually hover around 0.5%-1.5% annually, ultimately depending on the underlying benefit. Here at The Lambert Agency, we always evaluate your overall goals to best determine whether riders are worth the associated costs.
  5. Surrender Charges
    Nearly all annuities will require you to keep your money fully invested for a lock-in period over a set amount of time. This is often referred to as the “surrender schedule”. If you choose to withdraw earlier than anticipated, you will likely end up paying the surrender fees. These fees range from 1%-10% and they usually decline over the years you have your funds held in the annuity.
  6. Other Transaction Fees
    Some annuity products may charge for such things as wire transfers, overnight mailing of documents, or excessive withdrawals during a set period of time. These fees, while generally negligible, do exist.

Which Annuities Have Higher (or Lower) Fees?

  • Variable Annuities: This form of annuity will often have the highest level of associated fees due in large part to its investment subaccounts and riders.
  • Indexed Annuities: This form of annuity will have moderate levels of fees, typically only if you add additional riders. The base product of an indexed annuity will often have no annual fee.
  • Fixed Annuities: This form of annuity will usually have the lowest fees, but the fees themselves will be baked into the interest rate rather than outright deducted.

When you choose to work with The Lambert Agency, we thoroughly break down the major and minute differences in annuity products, so you’re able to truly understand each and every trade-off, benefit, and fee involved. The bottom line is: more annuity features usually mean higher fees, but with these higher fees there’s more flexibility and guarantees.

How to Decide If the Fees Are Worth It

  1. Compare Benefits vs. Cost
    If your lifetime income rider ends up costing 1% annually, yet it guarantees an annual income of $30,000 for the entirety of your remaining years, it could be very well worth it.
  2. Evaluate Your Goals
    Whenever choosing an annuity product, you’ll always want to fully evaluate your goals. Are you seeking out pure income? Do you want market participation? Are you anticipating a wealth transfer? The correct annuity product will avoid paying for features you don’t need, thereby helping you avoid fees you don’t need to pay.
  3. Work With a Transparent Advisor
    When you choose to work with The Lambert Agency, we always fully illustrate your annuity options with and without riders, so you’re able to see the true impact on fees and income, in a detailed side-by-side comparison.

FAQs About Annuity Fees

Do all annuities have fees?
No, not all annuities have fees. Some fixed annuities have no explicitly stated annual fees, yet the costs are built into the credited interest rate of the annuity product.

Can annuity fees reduce my account value?
Yes, variable annuities typically experience this reduction in account value the most out of all annuity products. For this reason, it’s very important to balance growth potential against any offsets driven by fees.

How can I minimize fees?
Sometimes, the simpler annuity structure may be just what you need to align with your retirement goals, all at a lower annual cost.

Contact The Lambert Agency Today

Annuities can be a very powerful retirement tool, when you actually know what you’re paying for. Through properly breaking down annuity fees and comparing your various options, you’re able to ensure your money is working for you without the unnecessary, excessive costs. When you choose to work with The Lambert Agency, you’re choosing to work with an agency who believes in transparency and client education first and foremost. We will happily walk you through any and all fees, benefits, and features of your annuity product so you can feel truly confident prior to making a final decision on your preferred annuity.

Name
What type(s) of insurance are you interested in?
What type(s) of insurance do you currently have?
Are you willing to change your insurance agent?