ANNUITIES 101 There are several ways to invest money for retirement. Here we take a quick look at one of them—annuities— and how they can fit into a retirement strategy. WHAT’S AN ANNUITY? It’s a contract where an insurance company promises to make payments to the owner of the annuity over a specified period of time or for life. Annuities can help you meet the cost of essential expenses in retirement and help you create an income that you can’t outlive. There are two main types of annuities. • Begins paying income right away. • This is a good option for people who receive a large sum of money (for example, from an IRA rollover or inheritance) that they want to quickly transfer into a reliable form of income. Deferred: • Income payouts are delayed. Annuity owners decide when they want to begin receiving income—and any accumulated interest grows tax-deferred in the meantime. • This is helpful for people who will need income later in life, like during retirement. In addition to picking an immediate or deferred payment structure, there are fixed and variable annuity options to consider. Fixed: How It Works: Fixed annuities earn interest at a set rate. Every fixed annuity has a current interest rate and a minimum guaranteed interest rate. Guarantees are based on the financial strength and claims-paying ability of the issuing insurance company. The current interest rate is usually declared on an annual basis. Advantage: Fixed annuities are not affected by ups and downs in the market and guarantee a minimum interest rate. Drawback: Since fixed annuities are credited interest at a set rate, it is possible that the value of the annuity will not keep pace with inflation. Variable: How It Works: Variable annuities earn investment returns based on the performance of the subaccounts chosen. Advantage: Because funds are invested in variable subaccounts, they may keep up with—or even outpace—inflation. Drawback: Because investments are subject to market fluctuations, a variable annuity is riskier than a fixed annuity and can lose principal (the original amount of investment). ASK A PROFESSIONAL • Fees can vary widely among different annuity contracts—and if they’re high, they can make a major dent in savings. Ask a financial professional: What are the fees for the annuities? • While annuities grow tax-deferred, owners do have to pay income taxes on gains when money is withdrawn. They also may be subject to a 10% tax penalty if earnings are withdrawn before age 591⁄2. Ask a tax professional: What tax-related issues should be kept in mind? • Carefully review details about whether the annuity offers a death benefit. Ask a financial professional: Is there a death benefit included? • Some annuity contracts include living benefits available for an extra cost. For example, a variable annuity may offer a minimum account value or minimum lifetime income that’s guaranteed regardless of how subaccounts perform. Ask a financial professional: Are these available in the contract? U.S. ANNUITY SALES IN 20151 fixed $103.7 billion variable $133 billion GET HELP2 When it comes to retirement, don’t try to go it alone. 91% of U.S. baby boomers* who work with a financial advisor have retirement savings— compared to 42% who don’t work with a financial advisor. • Participants surveyed were between the ages of 53 and 69. 1 “U.S. Individual Annuities Sales Survey,” Feb. 23, 2016, LIMRA Secure Retirement Institute 2 “Boomer Expectations for Retirement 2016,” April 2016, Insured Retirement Institute Insurance products issued or offered by Thrivent Financial, the marketing name for Thrivent Financial for Lutherans, Appleton, WI. Not all products are available in all states. Securities and investment advisory services are offered through Thrivent Investment Management Inc., 625 Fourth Ave. S., Minneapolis, MN 55415, a FINRA and SIPC member and a wholly owned subsidiary of Thrivent. Investing in a variable annuity involves risks, including the possible loss of principal. The prospectus contains more complete information on the investment objectives, risks, charges and expenses of the fund, which investors should read and consider carefully before investing. Prospectuses are available from a Thrivent Financial representative or at Thrivent.com.
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