This may come as a surprise, since annuities are generally marketed to older clients, but there isn’t a hard and fast rule about when annuities are appropriate. There is an ideal window for purchasing an annuity, but it might be wider than you previously thought. Are you thinking of purchasing an annuity in Colorado? If so, here are some things to consider in regards to your age and if an annuity is right for you.
What is the Best Age to Invest in an Annuity?
Colorado’s Annuity Resource
What is the Best Age to Invest in an Annuity?
Age Doesn’t ALWAYS Matter
The first thing you should know about annuities is that your age doesn’t always necessitate the need for an annuity. In other words, just because you’re 55 or 70 doesn’t mean you need an annuity, or would even benefit from having one. What matters more is what you’re trying to accomplish with an annuity. The most common reasons for seeking an annuity include the need for principal protection, income for life, legacy funds, and planning for long-term care later in life. If you’re looking to accommodate for one of these goals, then an annuity might be right for you, especially if you’re over the age of 50. Annuities can be sold to younger buyers, but they are typically the exception, not the rule, and have very specific circumstances.
Annuity and Life Expectancy
Perhaps the most important factor when trying to calculate how you’ll benefit from an annuity is your life expectancy at the time that you begin payments. Your life expectancy at the time you begin paying your annuity determines how much your payout will be. This means that the younger you are, the smaller your payout will be since your life expectancy is so long. This is why you rarely see anyone younger than 50 pursuing annuities. Likewise, it’s the reason that you see fewer annuities being sold after the age of 80 since life expectancy is so short at that point and payments tend to be very high.
Annuities for Seniors
At this point, you might be thinking, “Well, it sounds like annuities are just a good investment for the elderly.” That all depends on a person’s specific financial goals. Annuities are not a catch-all solution that fits every person’s circumstance. If a senior’s goal is to achieve an additional fixed income stream or principal protection, then yes, an annuity could be a stellar option, especially when trying to fill in some income gaps later in life. However, the older a person is, the higher their payments may become. It’s best to speak with professionals like us at Big Sky Financial, and we can help you determine if an annuity is right for you!
Annuities for Younger People
If you’re under the age of 50, you can still buy an annuity — but that doesn’t necessarily mean that you should. The reasoning behind this, once again, has to do a lot with your life expectancy. Before age 50, your investments are better spent in growth opportunities. This is especially true since you can’t even touch your annuity payouts prior to age 59 ½ without a penalty. If you’re younger than 50, focus instead on long-term investing since, quite literally, time is on your side. That said, there are very specific circumstances where annuities make sense even for someone as young as a child — but these are exceptions, not the rule.
So is there a right age to start looking into annuities? Generally, if you’re older than 50 or younger than 80, you’re in the ideal window, and you should give us a call to talk about your options! Outside of that window, there are still options available to you, but it might not be an annuity. Call us today to set up your free consultation!