In the heat of summer, you’re planning beach trips, stocking up on sunscreen, and scheduling backyard barbecues. Retirement planning deserves that same season-by-season approach—fresh, steady, and secure. An annuity ladder works like planting sunflowers at staggered times: you sow investments at different intervals so you’ll always have blooms—reliable income—when you need them.
What Is an Annuity Ladder?
Think of buying several beach umbrellas, but instead of getting them all at once, you spread the purchases across the summer. If prices dip in mid-July, you benefit; if they rise in August, you’re already covered. An annuity ladder does the same for your retirement income:
- Staggered Purchases
- You buy one annuity now, another a year from now, and so on.
- Smoothed Rates
- Spreading purchases helps you avoid locking all your money into one interest rate.
- Customized Timing
You match each purchase to a specific time you’ll need the money, such as planning a pool party just before school starts.
Key Takeaways
- Reliable Income: Annuities pay you a steady stream of money, like an ice-cream truck that shows up on schedule.
- Rate Protection: Spacing out purchases over several “summers” helps you catch potential higher rates if the market heats up.
- Balanced Plan: Mixing annuities with stocks and bonds keeps your overall strategy flexible, like having both a beach towel and a picnic blanket ready.
How an Annuity Ladder Works
- Choose Your Timing: Decide whether you’ll buy a new annuity each summer (year) for, say, five seasons (years).
- Divide Your Budget: If you have $100,000, you might invest $20,000 each season.
- Reap the Rewards: Each season brings its interest rate. If rates climb later, your new purchases capture those higher returns, just like catching a perfect sunset.
Pairing an annuity ladder with a Roth conversion may be another savvy consideration—think of freezing lemonade ahead for summer’s hottest days: you pay taxes now, so your future withdrawals can be tax-free.
Things to Watch Out For
- Limited Access: Taking money out early may trigger penalties, like breaking a popsicle stick before you’ve enjoyed the treat.
- No FDIC Backup: Unlike a savings account, annuities aren’t insured by the FDIC. You depend on the insurer’s strength.
- Inheritance Details: Unless you add options like joint-and-survivor payouts, any leftover principal may not pass to loved ones.
Variable annuities offer more growth potential but come with extra risk, like surfing bigger waves: thrilling but bumpier.
Building Your Own Annuity Ladder
- Stagger Your Investments: Spread out “planting” over multiple summers (years).
- Mix Annuity Types: Combine fixed, indexed, and variable annuities—like blending lemonade, iced tea, and fruit punch.
- Set Flexible Payout Dates: Align income with key life events—college tuition in August, holiday travel in December, or an extra cushion in your “golden years.”
Ready to Get Started?
A well-planned annuity ladder can be as refreshing as a backyard sprinkler on a hot July afternoon—steady income exactly when you need it. If you’d like to learn more about how an annuity ladder could fit into your retirement plan, let’s set up a complimentary meeting and dive into the details.
Click the “Contact me” button to schedule your complimentary meeting today.
Annuities are long-term insurance contracts that involve fees and charges, including possible surrender penalties, and they are not suitable for everyone. Withdrawals prior to age 59-1/2 may result in a 10% IRS tax penalty, in addition to any ordinary income tax. Any guarantees of the annuity are backed by the financial strength of the underlying insurance company and for variable annuities, do not apply to the performance of the variable subaccounts which will fluctuate with market conditions Product and feature availability may vary by state. Variable annuities are subject to market risk, including the potential for losses.
