Fixed Annuities for Single Women
As the retirement dream continues to inch outside of the reach of more and more people, single women find themselves especially challenged to achieve meaningful financial independence for their golden years. Although times have changed and, along with it, the negative income disparity between men and women, which has narrowed, single women still must overcome hurdles that are unique to them.
Women of Today
Women, in general, face greater obstacles than men in financial arena due to the fact that, according to statistics, they still earn less, save less, tend start working later and are more likely to leave the workforce to care for children or an elder. For married women, the risk of financial uncertainty at retirement is often mitigated by marriage and the benefit of a working spouse.
Single women, especially those who choose or are forced to stay single, face an increasing amount of financial uncertainty that, short of foresight and planning, will likely forestall any notion of retirement.
Because women, statistically, outlive men, their savings needs for a lifelong income are greater. The major quandary, therefore, is if women, on average, earn less than men, how can they save more?
The stark reality is that many single women don’t save enough or are ill-equipped to manage their nest eggs, so they are more at risk to live out their years near the poverty line. According to U.s Census Bureau statistics (2009) one out of five single women enter retirement in poverty (as opposed to 1 out 10 for women in general)
For single women with a little foresight and some time to save, the priority ought to be to secure a steady stream of lifetime income. Although this may seem like a tall order, there are savings vehicles that can do just that while, at the same time, eliminate the burden of managing a nest egg.
Annuities have long been considered the investment vehicle of choice for those who desire safety of their principle along with a guaranteed income for life. Along with pensions and Social Security, annuities are the only vehicles that can guarantee a lifetime paycheck.
Most single women today don’t have access to a pension plan and, according to the Social Security Administration, women recipients receive, on average, $800 of monthly benefit compared to men who receive $1,177. An annuity, therefore, offers the only viable alternative for single women to secure a guaranteed stream of income that can lift them above the poverty line.
Why An Annuity Works For Single Women
While there are other retirement savings vehicles that should be considered, such as an IRA or an employer-sponsored retirement account, an annuity should be at the forefront of any mix of savings vehicles. Here’s why:
- Annuities, especially those offered by the highest rated insurance companies (A+ A.M. Best rating), are safe and secure.
- Annuities, like IRAs and employer sponsored plans, enjoy tax favored treatment of savings accumulation.
- Annuities can be structured as a forced savings vehicles with automatic deposits.
- Unlike an IRA, annuity values can be accessed up to 10% a year, before age 59 ½ without an IRS penalty. The withdrawn amount is usually subject to surrender fees and taxes on interest withdrawn.
- Annuity values can be passed to beneficiaries outside of probate.
- Depending on the state you live in, annuities can be withdrawn to cover long term care expenses.
- Annuities can be transferred free of IRS penalties and taxes to another annuity provider.
- Women receive higher annuity payouts than men do as a result of their superior mortality
The most important reason why annuities work for single women is:
- Annuity values can be converted to create a guaranteed stream of income that you cannot outlive.
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Annuities Are The Foundation For Growth
This is not to sell the single woman short. Although single women are more prone to circumstances, as described above, that can hinder their ability to advance financially, they are just as capable as the next person to achieve success and independence. With solid fortitude and the right opportunities, they can move up the ladder or start a business, and expand their earnings and savings capacity. And, it happens for many.
Having a safe and secure annuity as the foundation of her financial future, enables the single woman to lengthen her stride and take more risks in both her career and in her savings strategies. With a retirement income safety net underneath her, she can consider career and savings opportunities that, while a little riskier, offer greater upside potential.
Consider the following example of the results from a tax deferred annuity:
A woman, aged 40 saves $350 per month, increasing her savings rate by 3% a year, earning 3% guaranteed interest, will accumulate $250,000 by age 67. Should she decide to retire at age 67, she can convert her annuity savings into a guaranteed monthly income of $1430 payable for life.
As her ability to save increases, she can direct those savings into other growth oriented investments for the opportunity to increase her retirement income. She will be secure in the fact that, no matter how her other investments perform, she will be guaranteed $1430 per month.
For single women, annuities can increase the certainty of their financial futures helping them to clear the hurdles that get in there way.
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