How To Protect Your Accumulated Nest Egg
Lifetime Annuities
How To Decide on Annuities Type
Short Term Annuities
At Stone Retirement Income, we believe in providing personalized service to each of our clients. We take the time to understand your unique needs and recommend the best annuity solutions to meet them.
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Short Term Annuities
How To Decide on Annuities Type
Short Term Annuities
We work with multiple insurance carriers to ensure that our clients receive the best annuity at the best price. Our team will shop around and compare rates to find you the most competitive pricing and terms.
How To Decide on Annuities Type
How To Decide on Annuities Type
How To Decide on Annuities Type
Our team of insurance experts has over 50 years of combined experience in the industry. We are here to answer your questions, provide advice, and guide you through the insurance process.
Lifetime Annuities
Never run out of Money
What is a lifetime annuity?
You can think of a lifetime annuity as investment vehicle that functions as a personal pension plan. Sometimes referred to as “single life,” “straight life,” or “non-refund,” these are a form of immediate annuity that provides income for your entire life.
The payments can be increased to cover a second person. This is called a “Joint and Survivor” annuity. While most provide income for life, some may offer the option of payments for a fixed number of years.
A lifetime annuity could serve as a retirement income supplement to Social Security checks, 401(k) retirement plans, company pension funds, etc. Lifetime annuities provide income for as long as you live - even after all the money you contributed is exhausted. They can be useful for those who want the certainty and security of establishing a regular and guaranteed income stream. If, however, you die before all the funds in your account have been used up, the payment option to your beneficiaries will be determined by the choice you made when you purchased the annuity. In some cases, no payouts will be made to your dependents or other beneficiaries. Instead, you will be getting an income that you can’t outlive.
A straight life annuity makes sense for someone who needs the most retirement income possible and does not plan to use the money invested for dependents or other beneficiaries.
Short Term Annuities
Have you heard of Laddering?
Laddering is a financial strategy that can help you maximize the value of your annuity contracts. It is a relatively straightforward approach that can bolster your income and mitigate exposure to interest rate risk.
Many investors buy CDs and bonds with staggered maturity dates. This practice is referred to as laddering. One reason to do this is so you can access money when the CDs and bonds mature without paying surrender charges. Another reason you might consider laddering is because of interest rates. No one, not even experts, can correctly predict interest rate movements, so laddering is a prudent and effective way to address the unknown.
Annuities can also be laddered, and those laddering strategies can be used for income or yield. Yield is the return you earn over time from keeping your money in an annuity.1 Laddering CDs and bonds would be categorized as laddering for yield. With annuities, you can ladder for yield using fixed annuities, but you can also ladder for income.
More on Why Investors Ladder Annuities
The objective of annuity laddering is to bolster your income streams and reduce exposure to interest rate risk. This means reducing the possibility of putting too much money into relatively low-yielding annuities and increasing the possibility of putting money into relatively high-yielding instruments.
Matt Carey, a retirement expert with experience at the U.S. Department of the Treasury, summarizes the benefits as follows: “The main benefits of laddering are spreading interest rate and reinvestment risks over time, and getting short-term liquidity, while taking advantage of longer-term rates.”
The Annuity Lifetime Ladder Utilizes SPIAs
The lifetime ladder strategy involves buying single-premium immediate annuities (SPIAs) over a specific period of time. SPIAs are annuities that pay an income immediately after you purchase the annuity.4 The strategy is designed to catch interest rates as they rise as the life expectancy of the annuitant gets shorter. For example, a person with $500,000 wants to guarantee a lifetime income stream but is concerned that the current low interest rates might rise in the future. An efficient lifetime ladder would include the purchase of a $100,000 SPIA every year for five years. Even if interest rates remain the same during that period, the subsequent payouts will be higher based on the annuitant's age at the time of purchase. If interest rates rise, the payout will be even higher.
The Target Date Stairstep Ladder Utilizes DIAs
This type of ladder involves longevity annuities—also known as deferred income annuities (DIA)—and starting the income at different intervals. Deferred annuities earn interest during an accumulation period, then can be annuitized for a lifetime income.4 The target date stairstep ladder strategy is typically used to combat inflation by having different lifetime income streams turning on at future dates. An example of this could be a 60-year-old with $400,000 allocated to cover future inflation. Four separate longevity annuities (DIA) would be purchased at ages 65, 70, 75, and 80. Annuity income is primarily based on your life expectancy at the time the income stream is turned on, so as you age, the payments are higher. You would annuitize each annuity in the order of purchase, and each subsequent DIA would pay out at a higher rate.
