Annuity Basics: How Lundervold Financial Can Help You Understand and Manage Your Annuities

Lundervold Financial can take a look at your complete financial picture and help you determine whether your retirement assets are going to help you meet your goals in retirement. If we feel an annuity would enhance your retirement plan we can review with you several options.

We are based in the Twin Cities, Minnesota, area, but we work with clients all over the United States.

Prefer to talk to someone at Lundervold Financial about annuities?

What is an Annuity?

An annuity is a financial contract that requires you to buy it through a single payment or series of payments, and it pays you in the future in a single payment or series of payments. Annuities are commonly used in retirement planning, and they are issued by insurance companies. You can purchase directly from the insurance company or through brokerage firms, mutual fund companies, and financial firms such as Lundervold Financial.

Most guaranteed annuities have provisions that allow you to withdraw a percentage of the value of the contract each year up to a certain limit. However, withdrawals will reduce the contract value and the value of any protected benefits. Excess withdrawals above the restricted limit typically incur “surrender charges” within the first five to 15 years of the contract. Because annuities are designed as long-term retirement income vehicles, withdrawals made before age 59.5 are subject to a 10% penalty fee, and all withdrawals may be subject to income taxes.

When you are ready to receive income distributions, an annuity offers a variety of guaranteed payout options — some even for life.

Who Should Buy Annuities?

A recent study found that 67% of Americans believe our nation is facing a “retirement crisis.”

With pension offerings on the decline and contribution limits on your other retirement instruments, you might want to consider a fixed income component to your retirement strategy. In short, adding an annuity product may be an opportunity to help ensure a portion of your retirement income will be guaranteed.


How an Annuity Works for Your Retirement

As people plan for retirement, and they exhaust their contribution limits to their 401(k), IRA or other retirement account, they can buy annuities, which offer tax-deferred options for retirement planning. They are enticing to use as retirement vehicles because they can offer a guaranteed stream of payments that last as long as you live.

Annuities aren’t for everyone. If you have enough money from Social Security and your other retirement accounts, then an annuity might not be for you. Annuity products are typically used by people who are looking for additional guaranteed income in retirement.

If you are interested in an annuity, you should work with an advisor who can look at your retirement portfolio and give you an analysis of your preparedness for retirement. If your financial advisor recommends annuities, make sure you ask about how they work, including:

  • Fees
  • Annuity insurance charges
  • Taxation
  • Conditions
  • “Free look” period

The last item, “free look,” is a law that varies from state to state that gives you 10 to 30 days to walk away from an annuity and get your money back. In Minnesota, for example, the so-called “cooling off” period is 10 days for life insurance policies and annuities. In Arizona, if you are over age 65, you have 30 days, and if you are under 65, you have 10 days.

Wondering how to buy an annuity or if an annuity product is right for you? Talk to someone at Lundervold Financial.

Learn More About Lundervold Financial’s Blueprint for Financial Clarity™

  • When do you want to retire? What do you want your retirement to look like? What sources of income will you have? What expenses will you have? Will you have debt?
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  • Where is your money invested now? What is your tolerance for risk? How hands-on do you want to be with investment management? How liquid will your investments be?
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  • Are there tax breaks and deductions that you can take advantage of as you age and approach retirement? Once you retire, are there tax benefits you need to know about?
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  • What insurance policies do you have in place for long-term medical care, and are there others that you might consider? Do you have an advance care plan?
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  • Do you have an estate plan*? Do you need us to introduce you to an estate planner and work with them to help you maximize your income during retirement and for your beneficiaries?
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*Lundervold Financial does not provide tax or estate planning, but we are part of our clients’ estate planning team. If you are looking for an estate planner, we can refer you to professionals who provide the following services: trusts, probate, charitable giving, estate planning, and tax planning.

If You Are Interested in Investing in Annuities, Contact Lundervold Financial

If you have questions or concerns about annuities, schedule a time to meet or talk with an advisor at Lundervold Financial. We have a wealth of experience selling, managing and guiding our clients’ annuities. Review our calendar of events for upcoming financial and retirement planning seminars.