annuities for retirement

How Baby Boomer Women Can Use Annuities to Their Advantage

For baby boomers on the cusp of retirement, immediate annuities provide a fast turnaround and are available to provide income into the sunset of retirement.

No one dreams of barely scraping by during their golden years, but for some, this reality is hard to avoid.

Baby boomer women of today have established themselves in the workplace and are seeking ways to carve out savings for retirement. Determining how to best leverage the resources we have worked hard for is difficult. Fortunately, annuities are one available solution, offering security and peace of mind as the future approaches.

Difficulties Saving for Retirement

There are many factors why women struggle with paying for retirement, including longer life spans than men. Also, unmarried women without the financial support of a spouse could have less available income to save.

Data from the U.S. Census Bureau shows women earned 77 cents for every dollar men earned in 2012. This complicates the affordability of daily living and jeopardizes retirement saving. As a result, there is less money available to put into a 401(k), less Social Security income and, if pensions are offered, decreased pension benefits.

A 2011 NBC Nightly News segment revealed that 32 percent of baby boomer women have 401(k) plans and 10 percent have pensions. The broadcast also reported that 40 percent of baby boomer women — nearly 17 million — are single. That means many women carry the financial burden alone.

Longevity also exacerbates the difficulty of retirement planning because the money needs to last longer. The Social Security Administration website reports that one-third of seniors are living past 90. And while a 65-year-old man may live until 84, a woman that age is more likely to live until 86.

Financial limitations combined with many years of retirement expenses make planning for a stable, long-term retirement income vital. Purchasing an annuity is one way to ensure you have guaranteed income along with tax-advantage savings.

Advantages of Annuities

Annuities are an insurance product purchased with a lump sum or premiums, then distributed through a series of periodic payments. They offer retirement income, which anchors portfolios, and provide long-lasting security and financial independence. If you need money at the moment for a down payment, you can cash out your annuity or structured settlement payments.

With a growing market of annuity plans available, you will have little difficulty finding a payment schedule tailored to meet your needs and supplement Social Security and pension benefits.

Keeping money in an annuity rather than volatile market investments removes your assets from risk. They can replace bonds, making up the conservative portion of your portfolio. Additionally, while IRAs and 401(k) plans have limits, annuities do not.

For baby boomers on the cusp of retirement, immediate annuities provide a fast turnaround and are available to provide income into the sunset of retirement. Long-term care riders can also be purchased for nursing home expenses.

Preparing to Buy an Annuity

Taking advantage of annuities is a step that should be taken with caution. Annuity contracts have a tendency to complicate and confuse even the shrewdest investors.

Consider these guidelines before signing an annuity contract. They could prevent a financial misstep.

* Start by recognizing the limitations of annuities. Once you commit to this type of plan, you are locked in and will experience a certain level of illiquidity. Make sure you have sufficient resources to cover your needs between payments.

*Look at the whole picture and consider how to make the most of your assets. If annuity payments and a part-time job are enough to meet basic expenses, you could save money by delaying Social Security benefits.

* Clearly define what you expect from an annuity. How long will it pay out? How often will you receive payments? How much will those payments be? Knowing the answers to these questions ahead of time prevents getting lost in the confusing technical language. Once your questions are answered and you are ready to proceed, have a financial advisor evaluate the contract to confirm that the annuity meets your needs.


About the Author:
Alanna Ritchie has spent years studying, writing and learning to love the intricacies of the English language. Today, she works as a content writer for, where her primary focus is personal wealth management.

Photo: Chris Grande