After Retirement, Consider Immediate Annuities as an Income Source

Gavin Magor

Over the span of the last few weeks, I shared all the ins-and-outs of variable annuities and the alternatives to them (including fixed annuities). You can read parts one, two, three, and four of the series online.

The series focused on using annuities while you’re still working as a way to build up enough assets for retirement. But annuities can also be a solid choice even AFTER you get your gold watch and head off into the sunset (or onto the golf course!)

Specifically, they’re a worthy investment vehicle if you need to roll your savings out of a 401k or other company-sponsored retirement plan. You can move the funds into a variable annuity where they’ll retain their tax-deferred status while still allowing you to begin using your retirement savings for your living expenses. This is called an “immediate annuity.” You pay in a lump sum, and you begin receiving a monthly stipend immediately.

Your immediate annuity can either be fixed or variable. The fixed variety guarantees you a fixed monthly payout amount for the remainder of your life. In contrast, in a variable annuity, your monthly stipend will be periodically adjusted based on the performance of your investments. Many investors opt for the variable annuity, even though the payout isn’t guaranteed, because stock market investments have historically outperformed all other assets.

There’s no guarantee this will continue to be true in the future, however. Indeed, a long bear market could actually lower the income you receive from an immediate variable annuity. Thus, variable annuities offer the prospect of higher payouts in the underlying investments, provided they’re timed properly, while the guaranteed payouts in a fixed annuity stay at the same level for as long as you live.

So, faced with a choice of at least 255 insurers that handle annuities, which should you choose? That’s where our firm comes in. Currently, there are 53 annuity insurers that have a “Recommended” Weiss Safety Rating.

This means that you have a lot of choices that you can make with confidence. We recommend that you take the time to research the companies that you’re prepared to work with. Then discuss those chosen companies with your independent financial advisor to ensure a good fit for your personal circumstances.

In the meantime, here is a Screener I just created to get you started. It shows the five strongest insurers in our coverage universe, their Weiss Ratings, where they’re based, what kinds of insurance they offer, and what their total assets are.

Data Date: 1/10/2018

As always, whether you choose an insurer from this list or on a recommendation from someone else, be sure to check that insurer’s safety rating up front and on an ongoing basis. You can do so using the Weiss Ratings website.

Plus, as a Weiss Ratings Platinum subscriber, you can complete and save your own customized Screeners – of insurance companies, banks, credit unions, and even investment products.

Think Safety,

Gavin Magor

Gavin has more than 30 years of international experience in credit-risk management, commercial lending and insurance, banking and stock analysis and holds an MBA. Gavin oversees the Weiss ratings process, developing the methodology for Weiss’ Sovereign Debt and Global Bank Ratings. Gavin has appeared on both radio and television, including ABC and NBC as an expert in insurance, bank and stock ratings and has been quoted by CNBC, The New York Times, Los Angeles Times, and Reuters as well as several regional newspapers and trade media.