You’ve heard many times before that diversification is a smart retirement strategy. But what are some of the best tools and why? For example, incorporating an annuity into your retirement portfolio offers several advantages, depending on your financial goals, risk tolerance, and overall strategy. So should it be part of your retirement plan? The experienced advisors at Leonard Financial Solutions explain some benefits of annuities. 

What Is an Annuity and How Does It Work?

An annuity is a long-term financial product that can help you save for retirement or other goals. It’s designed to provide a steady stream of income, tax benefits, and the security of knowing your money will be there when you need it. Depending on the type of annuity, you may have access to various features such as death benefits, withdrawal options, and potential investment growth.

An annuity allows you to deposit a lump sum of money into it, or make regular payments over time. The money is then invested in financial markets, such as stocks, bonds, and mutual funds. Depending on the type of annuity, your money may grow at a higher rate than it would in a savings account or other low-risk investments. 

When you begin to receive payouts from the annuity, you’ll typically receive more than you put into it due to investment growth. 

Some Benefits of Annuities in New Jersey

Learning all you can about annuities helps paint a clearer picture of how they might fit into your long-term financial goals. Although plans vary, here are some popular benefits: 

  • An annuity can provide a steady income, tax advantages, and death benefits.
  • Unlike retirement accounts like IRAs and 401(k)s, annuities have no contribution limits. This can be advantageous if you’ve maximized your contributions to other tax-advantaged retirement accounts and still want to invest more for retirement.
  • Withdrawals from some types of annuities may not be taxed until they are withdrawn.
  • Many annuities also offer death benefits that can help protect your beneficiaries after you pass away.
  • Annuities provide stability and security, as the invested money is less vulnerable to market fluctuations than other investments.
It’s essential to keep in mind that annuities can be complex financial products with various features and fees, and some plans might not offer the same level of flexibility and liquidity as other retirement investments. Our team would be happy to schedule a consultation with you to discuss just how annuities may fit into your overall retirement strategy, so please give us a call.