What's an income annuity?
As its name implies, an income annuity is a secure, dependable way to generate retirement income. The amount you receive is predictable—no market ups and downs here—making it easy for you to set a budget and stick with it.
When you purchase an income annuity (also called an immediate annuity or fixed annuity), you're paying a lump sum of money to an insurance company in return for steady income. This decision is final.*
Why choose an income annuity?
You've saved all your life to retire comfortably, and now it's time to think about how you'll spend your money. It's important to devise a plan to spend from your portfolio so that you'll have enough money to last your lifetime.
Answer these questions to help you decide whether an income annuity is the right choice for you.
Do you have enough money to meet basic everyday expenses?
Itemize your basic living expenses
Housing, clothing, food, health. When defining your basic living expenses, focus on routine and regular costs by filling in the blank: "For my basic living expenses, I could live on as little as $____ a month."
Add up your income
Existing guaranteed income sources include Social Security, Railroad Retirement benefits, and corporate, military, and government pensions.
Do the math
Are your basic living expenses more than your income? If they are, consider taking a portion of your portfolio to set up an income stream to bridge the gap and cover your bills.
Do you want to protect your assets against a market decline?
But when you're near or in retirement, you want to protect against the risk that the markets' ups and downs will adversely affect your assets.
Buying an income annuity with a portion of your portfolio:
- Is a form of insurance against market fluctuations.
- Gives you the comfort of knowing that a market decline won't affect your ability to meet your spending needs because your income won't vary.
Are you prepared for a long retirement?
Statistics show that people are living longer than they expect, so it would be prudent to plan for a retirement of 20 years or more.
- A man reaching age 65 today can expect to live, on average, until age 84.3.**
- A woman turning age 65 today can expect to live on average, until age 86.6.**
- Of today's 65-year-olds, 1 in 4 will live past age 90 and 1 in 10 will live past age 95.**
Of course, your life expectancy depends on many factors beyond the statistics that would increase or decrease your life span—your overall health, lifestyle, and family history.
By guaranteeing income for life, you'll protect against the risk of outliving your assets.
Can you manage your retirement income on your own?
You may want to make your own decisions when it comes to withdrawing from your retirement assets—either by setting up systematic withdrawals or making withdrawals whenever you want. While these options give you flexibility and greater control over your assets, your payments aren't guaranteed for life.
Even if you've been investing on your own for years, knowing that an annuity can guarantee at least a portion of your retirement income might give you some peace of mind.
Selecting an income annuity
Which type of income annuity you select depends on whether you want to receive payments sooner (an immediate annuity) or later (a deferred annuity).
- With an immediate income annuity, payments can begin as soon as 30 days after purchase.
- With a deferred income annuity, payments can begin as late as your 85th birthday.
Size up your choices
We offer income annuities through a web-based platform, Income Solutions®.
- It's easy to use. Income Solutions lets you review income quotes and features of comparable annuities from leading insurance companies.
- There's no wait. Go online if you're a Vanguard client to get instant quotes or call one of our annuity specialists for help.
- It's free. There's never a charge for requesting a quote, and you're under no obligation once you receive one.
You've decided to buy an income annuity. How much is enough?
The simple answer is to buy only what you think you'll need. While you want to make sure you have money for daily living expenses, consider these factors:
- Will you have money left in your portfolio for emergencies or unanticipated purchases?
- Are you comfortable knowing your annuity purchase is generally irreversible?
The longer you wait for income payments to start, the less you'll need to invest. Your investment amount is based on your age at purchase, current interest rates, when payments start, and any features you add to the contract. Our licensed specialists can help you calculate the amount.
Go in-depth ... Read our brochure to learn more about your options.
Why choose Vanguard for an income annuity?
We work with Hueler Investment Services, Inc., the provider of the Income Solutions platform, to ensure delivery of high-quality products at a low cost—exactly what you'd expect from us.
How annuities work at Vanguard
We make it easy for you to purchase an annuity. We start with a free annuity "checkup" from an unbiased Vanguard annuity specialist who doesn't work for commissions.
Managing your annuity
After you've purchased an income annuity through Hueler's Income Solutions website, you'll manage your annuity with the insurer you selected.
Our licensed annuity specialists are here to help.
Monday through Friday
8 a.m. to 8 p.m., Eastern time
Get income in retirement
The sum total of your investments managed toward a specific goal.
Usually refers to common stock, which is an investment that represents part ownership in a corporation. Each share of stock is a proportional stake in the corporation's assets and profits.
A loan to a corporation, government, or government agency in exchange for regular interest payments. The bond issuer agrees to pay back the loan by a specific date. Bonds can be traded on the secondary market.
The money you have invested in the major asset classes—stocks, bonds, and short-term or "cash" investments.
Steve Utkus: So where does an income annuity fit into your retirement plan? All of us already have some annuity income. There’s Social Security, and many investors still have a traditional corporate or government pension. But over time, traditional pensions are declining, and more of us are retiring with 401(k)s, IRAs and our personal savings. This is where an income annuity can help.
We suggest investors consider covering their basic living expenses in retirement with guaranteed income. So what are your basic living expenses? They are the routine and recurring expenses like food, housing, transportation, and so on. Basic expenses also include routine costs like monthly premiums for health insurance. Think of basic living expenses as the money you need “to get by on.” These expenses are going to continue for your life. And so you want to consider backing them with sources of guaranteed income – like Social Security, pensions, and income annuities.
Income annuities aren't for every investor. But we believe every investor should consider them, and weigh the benefits and risks. They could play an important part in your retirement plan.
Our licensed annuity specialists are here to help with income annuities. Call 800-600-4816, Monday through Friday from 8 a.m. to 8 p.m., Eastern time.
All investing is subject to risk, including the possible loss of the money you invest.
Guarantees are subject to the claims-paying ability of the issuing insurance company.
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A fee charged by a broker for buying and selling securities.
The trading of a universe of investments, based on factors like supply and demand. For example, the "stock market" refers to the trading of stocks.
Income you can receive from your annuity. The annuity's interest rate is in effect for a specific period of time.