Why Your Retirement Plan Should Include an Annuity

Watching the economy over the last few years can feel like a nail-biting fourth quarter in the Super Bowl. If you are starting to plan for retirement and considering the rising cost of living in today’s age, having multiple eggs in your basket can be helpful. There are so many different ways to save for retirement, and a bunch of information scattered across the internet, which can make you wonder what the best options are for your hard-earned money. An annuity may not be your first thought, but it can be a great addition to your retirement savings plan.


What is an annuity?


An annuity is a contract that allows you to contribute a series of premium deposits

or a lump-sum amount to an insurance company in exchange for the guarantee of interest accumulation

and options for future income payments. In other words, you provide an initial payment and are provided with a guaranteed interest rate at which those funds will grow – you can then initiate payments back to you at some point in the future.


An annuity provides an income stream in the future, with the amount of those payments dependent on the amount you deposit now and when you decide to initiate your future payments.  At Navy Mutual, a nonprofit life insurance company that has been providing life insurance and annuities to the military community for 145 years, there are three types of annuities to choose from. Two, the Single Premium Immediate Annuity and the Single Premium Deferred Annuity,  require a single lump-sum deposit, with the minimum deposit amount being $10,000. These are great options if you are liquidating another asset and have a large amount of cash available to deposit. If you have a longer period of time before you think you’ll need funds and fewer funds available to you, you can choose the third type of annuity, a Flexible Premium Retirement Annuity, which allows you to make periodic deposits whenever it is convenient for you – so long as that first deposit is at least $100. Interest rates vary by product, but remember, the longer your money stays in an annuity, the more time the annuity has to grow.


Did you know a fixed annuity guarantees future income payments?


Although other types of annuities may allow the annuity owner to choose an index fund or dictate that funds be invested in the stock market, which inherently exposes those funds to a level of risk, fixed annuities have fixed interest rates that won’t go negative. Once your funds are deposited into one of Navy Mutual’s annuities, you can watch your funds grow over time; you don’t have to panic when the stock market dips because those changes in the economy will have no effect on the contract you’ve already purchased.


Bit by bit, it all adds up.


Whether you choose a single premium annuity or decide to make multiple deposits with the Flexible Premium Retirement Annuity, your annuity will grow over time. Single premium annuities grow at an interest rate defined at the time of contract purchase and deposit, while the flexible annuity offers an interest rate that changes with the sum of all deposits. For all annuity types, the higher the cumulative value of the annuity (And the longer the annuity has to grow), the higher the interest rate offered. As with compound interest in a savings account, with time, you can watch your funds grow.  


Protection for life.


When you purchase an annuity, you have the ability to choose how you would like to receive income payments in the future. Typically, you can choose to receive a certain amount of money in each payment for as long as the annuity will allow, choose to receive payments for a certain amount of time (with the payment amount dictated by the annuity’s balance and your chosen payout period), or choose to receive payments that are dependent on your lifespan. These “life income” payout options provide income payments for the rest of your life, no matter how long you live, so you will never hit a zero balance and have to worry about future payments. This makes choosing a life income payout option a real asset in retirement, when you rely on fixed income sources. 


Curious about adding an annuity to your retirement plan? Request more information from an expert at Navy Mutual to see what product might best fit your needs and help you retire with ease.


This article is sponsored by Navy Mutual. Protect your family and your future. Navy Mutual provides affordable life insurance and annuities to those who have answered our nation’s call. If you are active duty, in the reserve or guard, or retired from any branch of the United States military or uniformed services, we’d be honored to serve you. Click here for a quote from Navy Mutual today!


About the Author


Aj Smit is the author of the book Red Thread: Weaving an Embodied Life of Joy, speaker, glitter enthusiast, and professional weaver of Joy. She is a military spouse in S. Korea with a pup and houseplants galore. Aj has led various Red Tents, retreats, and workshops internationally over the last ten years to help others discover how to weave creativity and curiosity into their lives. You can find her on Facebook and Instagram at @TheJoyWeaver and TheJoyWeaver.com