Transforming Your Retirement Assets Into Income

Transforming Your Retirement Assets Into Income
Transforming Your Retirement Assets Into Income

You have the potential to turn retirement into the next exciting chapter in your life. Are you ready?

Help turn dreams into reality

Retirement is about your time and how you want to spend it. Think about what matters most to you.

You may schedule the majority of your adventures for the early part of your retirement. If so, you may choose an income option that provides more funding up front.

Or, if you have people depending on you, an income option that helps you meet your financial obligations to them may be more appropriate.Variable annuities and mutual funds are intended as long-term investments for retirement purposes. It's important to reacquaint yourself with the possible fees and charges these investment vehicles may assess before withdrawing accumulated amounts. Variable annuities and mutual funds are subject to the ups and downs of the market. 

How long will you need income?

The income option that is right for you will be based on how long you want your payments to last. Given today’s longer life expectancies, you may wish to plan for 20 to 30 years, or more, depending on how young you are when you retire.

Now that you’re thinking about your retirement years, it’s time to learn about your options. 

Lump sum withdrawal

You can turn your retirement savings into immediate income by simply withdrawing the entire amount from the plan with a lump-sum withdrawal. Many people believe that taking a lump sum withdrawal means taking all of your money out at once. That is one option. You can, however, also take just a portion of your account balance in a lump sum and leave the rest to continue to experience tax-deferred growth potential.

However, you may want to consider your other options because the tax burden and possible penalties and fees could be significant. 

Systematic withdrawals

Systematic withdrawals allow you to take money periodically from a qualified retirement plan. You select the payment period and the size of the withdrawals, either as a fixed dollar amount or a percentage of your account value. You can change or cancel your systematic withdrawal plan at any time.

After you turn 70½, you can use Systematic Withdrawals to help comply with the IRS Required Minimum Distribution rules.

Annuitization

With an annuity payout, you roll over your account balance for a guaranteed income paid at regular intervals over a specified period of time. Guarantees are based on the claims-paying ability of the issuing company. Plus, it’s straightforward – you select how long your payments will last, who will receive the payments and how. 

  • Lifetime annuity – This option pays you an income for as long as you live.
  • Period certain only – Fixed payments are guaranteed over a certain "period" of time – for instance, 5, 10 or 20 years. Payments cease at the end of the period. If you die before the period ends, your beneficiary will continue to receive payments until the end of the period.· 
  • Life and period certain – This option guarantees a fixed income over the longer of your lifetime or a "certain" period. Guarantees are based on the claims-paying ability of the issuing company. If you die before the period ends, payments continue to your beneficiary until the end of the period.
  • Joint and Survivor – This option guarantees an income over the longer of your lifetime or that of a beneficiary. Guarantees are based on the claims-paying ability of the issuing company. The income varies based on your age, the age of your beneficiary and the survivorship option selected.

Continual payout option

Through a continual payout option available with a lifetime annuity, you convert a portion of your annuity’s cash value into a series of payments over a certain amount of time. During that period, usually five years, you receive a guaranteed income. The rest of your account balance earns tax-deferred interest, potentially replenishing the annuitized portion, and remains available for use in case of an unforeseen financial situation. At the end of the period, depending on interest rates, you can repeat this process again.

With this option, you can annuitize a portion of your annuity’s cash value every five years. Meanwhile, your remaining cash value earns interest and has the potential to return to approximately its original level. Depending on interest rates, you can repeat the process again.

Assumes 6.00% Current Interest 3.00% Guaranteed Interest

Age

Beginning Balance

Monthly Income over 5-Year Period

Cumulative Income

Balance at End of Period with Interest

Monthly Income Over 5-Year Period

Cumulative Income

Balance at End of Period with Interest

60-65

$100,000

$484.40

$29,064

$100,000

$246.02

$14,761

$100,000

65-70

$100,000

$484.40

$58,128

$100,000

$246.02

$29,522

$100,000

70-75

$100,000

$484.40

$87,192

$100,000

$246.02

$44,284

$100,000

75-80

$100,000

$484.40

$116,255

$100,000

$246.02

$59,045

$100,000

This hypothetical illustration assumes $100,000 beginning balance and withdrawals made at the beginning of the month. Annuity rate based on current interest rate. Actual performance will vary depending on current interest rates effective at time of benefit election. Does not reflect IRS Required Minimum Distribution requirements for qualified funds.

Compare your distribution options

Most employer-sponsored plans allow you to mix your distribution options. You could take a partial lump-sum payment and use the money to purchase a lifetime annuity. Or use a portion of your assets to purchase an annuity and take Systematic Withdrawals from what you leave in the plan. You could even take Systematic Withdrawals from a deferred annuity, up to a certain limit before the payout period begins, to supplement your income. Read the chart below for a synopsis of your options.

 Lump Sum Systematic Withdrawals Annuitization Continual Payout Option

What are the payment amounts?

All or some of the account value.

You decide: a fixed dollar amount or a percentage of your account value.

Your choice of fixed or variable payments, or a combination of both.

A fixed amount on a fixed schedule, usually five years.

When do you receive your income?

Immediately.

Your choice: monthly, quarterly, semiannually or annually.

Your choice of guarantee periods: lifetime income for you, lifetime income or lifetime income over a specified period of time.

Monthly over a specified period of time, usually over five years.

How can you invest your income?

Once, it's removed from your account, it's up to you.

You can choose to invest your account balance amoung your plan's options.

If you select a variable annuity, you can choose to invest your account balance among the annuities options.

Your remaining cash value earns interest.

So you have access to your remaining account balance?

N/A for full lump sum. Yes for partial lump sum.

Yes

No

Yes: to unannuitized portion of your annuity.

Can you change your withdrawal options?

N/A

Yes

No

No

Taxes

Due upon withdrawal. An automatic 20% federal tax is withheld and state and local taxes will apply plus a 10% penalty if you have not reached 59½.

Payments are subject to current taxes. The account balance stays in the plan and can accumulate tax-deferred.

Payments are subject to current taxes, but are spread over the pay period for greater tax efficiency than systematic withdrawals.

Taxes are spread over the payment period.

Effect on heirs

Account balance passes to your beneficiaries which gives heirs flexibility in using assets.

Account balance passes to your beneficiaries which gives heirs flexibility in using assets.

Income can continue to your spouse and/or beneficiaries, depending on the payment period selected.

Income can continue to your spouse and/or beneficiaries until the end of the payment period.

You should consider the investment objectives, risks, charges and expenses of the variable product and its underlying fund options; or mutual funds offered through a retirement plan, carefully before investing. The prospectuses/prospectus summaries/information booklets contain this and other information, which can be obtained by contacting your local representative. Please read the information carefully before investing.



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