Most people know they should be planning for their retirement, but getting started is another story. Establishing a financial plan for a period of time in the distant future can seem overwhelming, especially if you’re at the beginning of your working career.

But however daunting it may appear, you do need a financial strategy to ensure the kind of retirement you want. The alternative is to leave things to chance, which will probably result in your approaching the end of your life just scraping by, without money or assets.

A good way to get started planning for your later years is by purchasing an annuity. That’s because an annuity provides you with a reliable source of retirement income over the long-term. Unlike savings accounts, the funds in an annuity can’t be depleted. And as life expectancy continues to increase, knowing that you have a consistent revenue stream is a major consideration when mapping out your financial strategy for retirement.

The second important feature of annuity is its flexibility. There are no limits as to how much you can contribute like there are with a 401(k) or IRA. You can fund your annuity either with a lump sum, or with a series of contributions.

Annuities also offer flexibility in terms of payout options:

• You can receive a lump sum payment of all of the money that has accumulated.
• You can receive payments over a specific number of years, referred to as the “period certain." If you die before the end of this time frame, your beneficiary will receive the remaining payments.
• You can receive payments for your entire lifetime.
• You can combine a lifetime annuity with a period certain annuity. This allows you to receive payments for your lifetime or the period certain, whichever is longer.
• You can choose a joint and survivor annuity so that payments last for the combined life of you and your spouse.

The third feature that makes an annuity such a viable option for retirement planning is that the tax on the accrued interest is deferred until you begin making withdrawals. If you’re currently in a high-income tax bracket, but expect to be in a lower one when you retire, an annuity is an especially attractive savings vehicle.

Finally, an annuity can be a good way to protect your assets from estate taxes. Most annuities pay a death benefit in the form of a life insurance claim, which means your heirs may not have to pay estate or income taxes on that proceeds. Ask your financial advisor if an annuity is right for you.

* Annuity withdrawals are generally taxed as ordinary income and may be subject to surrender charges, in addition to a 10% federal income tax penalty if made prior to age 59 1/2. The guarantees and payments of income are contingent on the claims paying ability of the issuing insurance carrier.

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