What is an annuity: clearing up the confusion on retirement income

NOVEMBER 17, 2023


Learn how an annuity may help fill important income gaps in your retirement

Planning for retirement can be complicated. And when it comes to annuities, it’s easy to get lost in the details. Let’s clear things up with a broader look at what annuities are and how they can fill important income gaps in your retirement.
 

What is an annuity?

An annuity is a retirement product that may provide protected,* reliable income when you need it. It can help bridge the gap between the savings you’ve accumulated over time and traditional sources of retirement income, like Social Security. Plus, if you don’t need the income immediately, you can let an annuity potentially grow tax deferred. That’s why an annuity may be a powerful addition to your financial plan. 
 

 

83% of people worry that their retirement savings may not be enough to live on

How do annuities work?

When you retire, how do you plan to pay for your basic needs and retirement goals? Our traditional vision of retirement often looks like riding off into the sunset, world travel, flowery shirts, and golf shoes on the horizon. But there are also many essential expenses to consider, like healthcare, daily costs of living, and family needs. And many retirees fear running out of money when they get there. That’s why supplementing your retirement savings with a stream of protected income from an annuity can help build confidence in your plans for the future.

Annuity choices today can be versatile, so you can choose the options that help meet both your wants and needs. And you can start by taking just a few simple steps:

  • Decide when you need retirement income: You can invest a lump sum and choose to start receiving payouts immediately or down the road.
  • Choose a product that’s right for you: We offer a variety of products that may fit your specific retirement needs.
  • Customize your plan with unique options: Discover how add-on benefits can guarantee income for life§ or help you leave a legacy.

Decide when you need retirement income.

At Jackson, we have a variety of financial calculators and tools that can help clear up the retirement planning process. With these tools, you can work with your financial professional to explore how much income might need in retirement—and when. Once you better understand your retirement needs, you can make a more informed decision about whether, and which, annuity products are a right fit for your plan.

  • Retirement Expense & Income Calculator: Our Retirement Expense & Income Calculator provides a way for you to work with a financial professional to effectively project expenses in retirement using factors such as current income, retirement age, and retirement state. You can also calculate the gap between essential expenses and guaranteed income to discover potential solutions.
  • Social Security Calculator: Social Security is a foundational part of a retirement income plan, and deciding when to start collecting monthly benefits is an important decision. Our Social Security calculator, powered by Envestnet MoneyGuide, is designed to help make your decision easier.
  • Benefits of Tax Deferral Calculator: Deposits into an annuity are tax-deferred, which can have a dramatic effect on the growth of an investment. Use this calculator to compare your potential tax advantages of purchasing an annuity versus an investment account where the interest is taxed each year.

Choose a product that’s right for you.

Your retirement plan is as unique as you are. For that reason, we offer different types of annuities to fit your specific wants and needs in retirement.

Variable annuities

Customize your assets across a wide range of investment options for potential growth. Add-on benefits, available for an extra charge, can provide some protection, guaranteed income for life, and legacy creation.

  • Diversify to grow your assets: Spreading your wealth across different types of investments may unlock the growth potential you've been waiting for.
  • Protect your income: Preparing for market ups and downs with an add-on benefit may help protect what you've earned and generate lifetime income.
  • Leave a lasting legacy: Safeguard what matters most with a range of death benefit options designed to prepare your legacy wishes and protect your loved ones.

Registered index-linked annuities

Explore the multiple index options, protection levels, and other ways to pursue growth with a registered index-linked annuity (RILA).

  • Grow your assets: You can take advantage of the tax-deferred growth potential that is measured by the return of a market index.
  • Protect your principal: Determining the level of protection you need may help cover you during small or large market downturns.
  • Flex when needed: Multiple options to customize how you grow your money for retirement.

Fixed index annuities

The market may be a bumpy ride, but it's historically been up more than down. Our fixed index annuities allow you to take advantage of that growth without risking your retirement nest egg.

  • Grow your assets and protect your principal: Choose from a variety of crediting methods for growth potential, while still protecting your principal from volatile markets.
  • Create guaranteed income: An add-on living benefit may help protect your income and prepare you for the essentials in retirement.
  • Leave a lasting legacy: Take the opportunity to provide for your loved ones or a charity of your choice through a death benefit.

Fixed annuities

Jackson offers fixed annuities as a conservative option for growing your nest egg without exposing your assets to stock market volatility.

  • Protect your principal: Your money is not in the market, so your principal is safe from market downturns.
  • Guarantee your growth: A fixed rate of return means your assets can continue to grow for the length of your contract. You can also defer taxes until you take income, leaving more money to grow.
  • Leave a legacy: Protect what you've earned and your loved ones' future with a death benefit.

Customize your plan with unique options.

With fewer employer-sponsored retirement plans available, you are probably looking for strategies to help grow and protect your hard-earned assets to fund the retirement you want. Annuities may provide an opportunity for growth and protection for income that can last your lifetime.

  • Income protection: Many people are living longer, healthier lives, so reliable income that lasts is essential to any retirement. Jackson annuities offer a variety of add-on benefits that can provide lifetime income to meet the challenge of longevity head-on.
  • Growth potential: The market can be a powerful tool for growing your assets. Some annuities offer protection against market ups and downs—helping to make investing less intimidating. They can even offer market access that provides opportunities for growth through a variety of investment options.
  • Tax deferral: You want to keep more of your earnings to invest in your retirement. And that's one of the advantages of annuities. You can defer taxes on your interest and investment earnings until you take income from them.
  • Legacy benefits: Sometimes there’s more to retirement than living a good life. With add-on benefits that preserve and grow assets in an annuity, planning for future generations has never been easier. And once it’s time to pass your legacy, it can go directly tax-deferred to your beneficiaries.

 

Ask your financial professional how an annuity may support your long-term retirement goals.

1Alliance for Lifetime Income, 2020 Protected Lifetime Income Study and Segmentation Report, October 26, 2020.

*Guarantees are backed by the claims-paying ability of the issuing insurance company.

Tax deferral offers no additional value if an IRA or a qualified plan, such as a 401(k), is used to fund an annuity and may be found at a lower cost in other investment products. It also may not be available if the annuity is owned by a legal entity such as a corporation or certain types of trusts.

Add-on benefits that provide income for the length of a designated life and/or lives may be available for an additional charge. The amount of income that these benefits may provide can vary depending on the age when income is taken, and how many lives are covered when the benefit is elected. The cost of these benefits may negatively impact the contract's cash value. There is no guarantee that a variable annuity with an add-on living benefit will provide sufficient supplemental retirement income.

§On the contract anniversary on or immediately following the designated life’s attained age 59½, the for-life guarantee becomes effective provided: 1) the contract value is greater than zero and 2) the contract has not been annuitized. If the designated life is age 59½ on the effective date of the endorsement, then the for-life guarantee becomes effective on that date.

Annuities are long-term, tax-deferred vehicles designed for retirement and are insurance contracts. Variable annuities and registered index-linked annuities involve investment risks and may lose value. Earnings are taxable as ordinary income when distributed. Individuals may be subject to a 10% additional tax for withdrawals before age 59½ unless an exception to the tax is met. Add-on living benefits are available for an extra charge in addition to the ongoing fees and expenses of the variable annuity and may be subject to conditions and limitations. There is no guarantee that a variable annuity with an add-on living benefit will provide sufficient supplemental retirement income.

Before investing, investors should carefully consider the investment objectives, risks, charges, and expenses of the variable annuity and its underlying investment options. The current contract prospectus and underlying fund prospectuses provide this and other important information. Please contact your financial professional or the Company to obtain the prospectuses. Please read the prospectuses carefully before investing or sending money.

Jackson, its distributors, and their respective representatives do not provide tax, accounting, or legal advice. Any tax statements contained herein were not intended or written to be used and cannot be used for the purpose of avoiding U.S. federal, state, or local tax penalties. Tax laws are complicated and subject to change. Tax results may depend on each taxpayer’s individual set of facts and circumstances. Clients should rely on their own independent advisors as to any tax, accounting, or legal statements made herein.

Guarantees are backed by the claims-paying ability of Jackson National Life Insurance Company or Jackson National Life Insurance Company of New York. For variable annuities, guarantees do not apply to the principal amount or investment performance of a variable annuity’s separate account or its underlying investments. They are not backed by the broker/dealer from which this annuity contract is purchased, by the insurance agency from which this annuity contract is purchased or any affiliates of those entities, and none makes any representations or guarantees regarding the claims-paying ability of Jackson National Life Insurance Company or Jackson National Life Insurance Company of New York.

The latest maturity date or income date allowed under an annuity contract is age 95, which is the required age to annuitize or take a lump sum. Please see the prospectus for important information regarding the annuitization of a variable annuity contract.

Annuities are issued by Jackson National Life Insurance Company (Home Office: Lansing, Michigan) and in New York, by Jackson National Life Insurance Company of New York (Home Office: Purchase, New York).  Annuities are distributed by Jackson National Life Distributors LLC, member FINRA. These contracts have limitations and restrictions. Jackson issues other annuities with similar features, benefits, limitations, and charges. Contact Jackson for more information.

Jackson® is the marketing name for Jackson Financial Inc., Jackson National Life Insurance Company®, and Jackson National Life Insurance Company of New York®.