Combining Annuities and Life Insurance

While retirement funds vary from person to person, experts recommend saving 10% to 15% of your pre-tax income every year. Saving early allows you to build a substantial nest egg and grow your money in the long run.

A key part of preparing for your retirement is researching different financial products. Both annuities and life insurance are the most common options you can include in your retirement strategy. Combining annuities and life insurance can be one way to achieve financial peace of mind.

In this blog, we will discuss the investment strategy that combines an annuity with a life insurance policy. 

Difference Between Annuities and Life Insurance

An annuity is an investment contract between you and an insurance company. With an annuity, you can make either a lump sum or regular premiums. In exchange, the insurance company agrees to give you a guaranteed stream of income during your retirement. 

There are different types of annuities that you can choose to match your specific needs. Although annuities are commonly offered by life insurance companies, it's not technically considered a life insurance policy.

Meanwhile, life insurance is a type of insurance that pays out a sum of money when the policyholder dies. For the life insurance to stay in force, the policyholder needs to continue paying the premiums.

Why You Should Combine Annuities¹ ² and Life Insurance

1. Death Benefit

When a death claim occurs, some annuities pay death benefits to the beneficiaries. However, note that not all annuities include a death benefit. Variable annuities and indexed annuities include a death benefit as part of their features. 

Upon the annuitant’s passing, the surviving spouse is entitled to the payments. If there is no surviving spouse, then the beneficiaries named in the annuity contract will receive the death benefits.

As for life insurance, one of its main purposes is to provide death benefits as a form of financial support. When the insured person dies, the beneficiaries will receive the policy’s face value.
Combining annuities and life insurance can provide an enhanced death benefit for the surviving family. This way, your beneficiaries will receive not only the death benefit from your insurance policy but also any remaining annuity value. With a larger payout, you can provide them with greater financial security for years to come.

2. Tax Advantages

Both annuities and life insurance policies offer tax benefits that help maximize your retirement savings. Annuities grow on a tax-deferred basis, which means there’s no need to pay taxes on your money while it’s in the account. pay taxes on earnings until you begin taking withdrawals. 

You’ll only pay taxes on the money when you begin taking withdrawals.

Likewise, life insurance payouts are generally tax-free. This means that the death benefit isn’t subject to income tax. When you combine annuities and life insurance, you can maximize tax efficiency and achieve your retirement goals.

3. Diversification³ of Your Portfolio

Financial experts always say that you shouldn’t put all your eggs in one basket. Diversification is a technique for spreading investments and managing risks. Having a variety of investments helps balance out your portfolio.

Investing in annuities and life insurance diversifies your retirement portfolio. This allows you to protect your retirement savings from risks and market fluctuations.

4. Guaranteed Retirement Income

As you might already know, annuities provide a reliable, guaranteed source of retirement income. Depending on your contract with the insurance company, your annuities can give a fixed monthly income regardless of the market's performance.

When it comes to life insurance, there’s a cash value portion that you can withdraw or borrow against. The cash value earns interest over time, which can complement your existing retirement savings. 

By integrating annuities and life insurance, you can protect your retirement income and ensure that you’re financially protected. This also allows you to leave a legacy for your loved ones.

Work With a Licensed Insurance Agent

Your retirement years should be your best years in life. At Integrity Wealth, we are experts in life insurance policies and annuities. Our team can guide you and ensure that your retirement will be a financially comfortable one. 

If you need help with retirement planning or anything related to insurance, we have you covered. We’ll assess your financial situation and introduce you to various options. Give us a call today for more details. We look forward to serving your financial needs!

Disclosures

*This blog contains general information that may not be suitable for everyone. The information contained herein should not be construed as personalized investment advice. There is no guarantee that the views and opinions expressed in this blog will come to pass. Investing in the stock market involves gains and losses and may not be suitable for all investors. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security.  Integrity Alliance, LLC does not offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstance.  Past performance is no guarantee of future results.

¹Fixed Annuities are long term insurance contracts and there is a surrender charge imposed generally during the first 5 to 7 years that you own the annuity contract. Indexed annuities are insurance contracts that, depending on the contract, may offer a guaranteed annual interest rate and some participation growth, if any, of a stock market index. Such contracts have substantial variation in terms, costs of guarantees and features and may cap participation or returns in significant ways. Investors are cautioned to carefully review an indexed annuity for its features, costs, risks, and how the variables are calculated. Any guarantees offered are backed by the financial strength of the insurance company. Surrender charges apply if not held to the end of the term. Withdrawals are taxed as ordinary income and, if taken prior to 59 ½, a 10% federal tax penalty.

²Please consider the investment objectives, risks, charges, and expenses carefully before investing in Variable Annuities. The prospectus, which contains this and other information about the variable annuity contract and the underlying investment options, can be obtained from the insurance company or your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

The investment return and principal value of the variable annuity investment options are not guaranteed. Variable annuity sub-accounts fluctuate with changes in market conditions. The principal may be worth more or less than the original amount invested when the annuity is surrendered.



³Neither Asset Allocation nor Diversification guarantee a profit or protect against a loss in a declining market. They are methods used to help manage investment risk.