What’s an annuity?
Annuities help protect against the risk of you outliving your money.
They generally come in two forms — deferred and immediate. Learn which one might be best for your situation.
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There’s a lot to consider when it comes to retirement planning. You might ask questions like: How can I protect my hard-earned retirement savings from market fluctuations? How can I cover basic expenses without a regular paycheck? Will I run out of money if I live a long time? If you’re looking for some peace of mind in retirement, an annuity could be a great option.
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So, what’s an annuity? It’s an insurance product that helps protect you against the risk of outliving your money. Here’s how it works. When you buy an annuity, you enter a contract with an insurer. You give them money, in exchange, they promise to give the money back to you plus interest at a later date or in the form of a reliable income stream.
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Annuities come in two main forms: deferred and immediate.
Deferred annuities are great long-term savings options. They allow you to grow money tax-deferred with the option to turn into income later. Your money will either grow at a fixed rate or a market-based rate, depending on the annuity you choose. When it comes time to retire, you can take the money out in a lump sum or start receiving scheduled payouts.
Immediate annuities, sometimes called income annuities, work best if you’re close to retirement. They let you quickly turn some of your savings into a reliable income stream. When you buy an immediate annuity, you open with a lump sum and start receiving payouts shortly after. You can choose to get guaranteed 1 payouts for the rest of your life, a set number of years or both 2. You can also add beneficiaries to your contract. That way, you can rest easy knowing your family will be taken care of.
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Ready to find out if an annuity is the right or you? Schedule a call with one of our Retirement Income Specialists.
Description of visual information: [1 Guarantees apply to certain insurance and annuity products and are subject to product terms, exclusions and limitations and the insurer's claims-paying ability and financial strength.
2 Money not previously taxed is taxed as income when paid. Withdrawals before age 59½ may be subject to a 10% federal tax penalty.
An annuity is a long-term insurance contract issued by an insurance company designed to provide a retirement income stream for life. Once the contract principal is converted into an income stream, you will no longer have access to your principal as a lump sum. Terms, conditions, limitations and surrender charges may apply.
Life insurance and annuities provided by USAA Life Insurance Company, San Antonio, TX and in New York by USAA Life Insurance Company of New York, Highland Falls, NY. All insurance products are subject to state availability, issue limitations and contractual terms and conditions. Each company has sole financial responsibility for its own products.] End of description.
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Why choose USAA Life Insurance Company for an annuity?
We've been providing insurance products and services for more than sixty years. And we're built around the core values of service, loyalty, honesty and integrity. Here's more of what you can expect from us.
Our Retirement Income Specialists
We're here to help you find the annuity that best fits your retirement plan.
Our USAA Retirement Income Specialists have the knowledge and insights to help you enjoy your retirement. They don’t work on commissions, and they can offer a complimentary review of your retirement outlook.
They'll help educate you about:
- Retirement goals.
- Income sources.
- Expenses and debt.
- 401(k)s, IRAs and other assets.
- Insurance and coverage limits.
You can get ready for your conversation using our retirement planning worksheet (Opens in a New Window).
Financial strength
The USAA Life Insurance Company maintains top-tier grades from all three key rating agencies. That includes the highest possible from A.M. Best and the second-highest possible from both Moody's Investor Service and S&P Global. See note 1
Commitment to the military
USAA ranks #1 on the Military Friendly® Company 2024 list.
Recognition by J.D. Power
USAA ranked #1 in Customer Satisfaction among Annuity Providers and Most Trusted in the J.D. Power 2024 U.S. Individual Annuity Study. See note 2
Annuities FAQ
When you buy an annuity, you put your money in a contract with an annuity provider, usually an insurance company. You give them money, and in return, they give you a guarantee they'll return the money plus interest in the form of reliable retirement income.
It depends on the annuity you have and the funds you use to buy it.
Immediate annuities
If you buy your annuity with pretax funds, then you'll pay federal income tax on all your payouts.
But if you buy it with after-tax funds, the IRS recognizes you've already paid taxes on that money. In that case, you'll only pay federal income tax on the portion of your payouts that's considered earnings. You won't pay taxes on the principal.
Deferred annuities
One benefit of saving in a deferred annuity is that your money grows tax deferred. Once you withdraw money from the annuity, the earnings will be taxable.
Though people often think about annuities as investments, they're actually insurance products. Insurance is all about transferring risk to someone else. When you buy an annuity, you essentially transfer the risk of outliving your money to a life insurance company.
You can add a beneficiary for a deferred annuity. If you die during your annuity term, they’ll receive the money.
You have a couple options if you have an immediate annuity.
- Choose a joint annuitant who’ll continue to receive your annuity benefits.
- Add a beneficiary and choose a guaranteed number of years to receive payments. If you die before you receive all guaranteed payments, your beneficiary will receive the remaining amount.
Get help settling an annuity.
Surviving the loss of a loved one involves many challenges and decisions. Our Survivor Relations team can be there for you during this difficult time.
We can help beneficiaries file an annuity claim and provide guidance on how to handle an estate.
Let’s start planning for your retirement.
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