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Low-Income Workers: How to Make Retirement Work for You

retirement plan written in notebook

As a low-income worker, you’re probably concerned about how you are going to manage retirement. Finding a retirement plan that works for you should be exciting! In retirement, you have the benefit of finally taking a break from all of your hard work. If you plan to retire, now is the time to consider your options.

What Is the Best Retirement Plan for Me?

Low-income workers may not reap the full benefits of 401(k)s or other retirement savings plans offered by their employers. Whether your employer offers retirement savings vessels or not, having a low-income stream may make it difficult to save for retirement. However, there are options available that you may not have considered, or may not have even heard of yet!

Consider Annuities

Annuities operate similarly to a 401(k). However, as a low-income worker, the funds allocated to your 401(k) may not be sufficient for your retirement. Annuities provide exponential growth for your investment and are a cost-effective way to save for retirement.

Only insurance agents with a state-issued life insurance license may offer annuities. Annuities are a safe and secure way to accumulate funds for retirement while avoiding breaking the bank. 

What Is an Annuity?

Annuities provide a guaranteed income over a predetermined period. The policyholder determines during which phase of their life they would be able to allocate funds into their annuity and when they’d like their income stream to begin flowing. During the accumulation (pay-in) period, policyholders make payments into their annuity

and watch it accumulate value. During the annuitization (pay-out) period, policyholders receive their investments in the form of an income stream that will last them a predesignated period that is determined by the policyholder. 

Different Types of Annuities

All annuities vary in investment options, pay-in, and pay-out periods. There are four distinct forms of annuities that each have their pros and cons. However, only three of them offer low-income workers the best chances for sufficient retirement income. The best part of an annuity for a low-income worker is that it is entirely up to you how much money you pay into your annuity.

Fixed Annuities

The fixed annuity ensures a predictable and steady income for those seeking retirement. Fixed annuities offer guaranteed minimum interest rates regarding your payments during the pay-in phase of an annuity. 

When you are ready to receive income from your annuity, the insurance company determines the size of each installment you have contributed during the pay-in phase. The size and frequency of installments will determine the cash amount of the income stream you will receive. Depending on the conditions you choose when creating your annuity, your pay-out period may last for a set period or for the rest of your life!

Indexed Annuities

Indexed annuities allow low-income workers to take full advantage of investing. Furthermore, indexed annuities are tied to a specific market index such as the Standard & Poors 500. These market indexes are in charge of monitoring the market activity of 500 US companies and their products. Depending on market performance, you may earn a significantly higher rate of interest than a fixed annuity. Indexed annuities do, however, limit the amount of return to roughly 80% rather than 100% due to participation rates.

Deferred Annuities

With deferred annuities, annuitants can expect a pay-out period to begin around ages 65 to 70 when most individuals enter retirement. Annuitants can defer fixed and indexed annuities to provide them with extra funds for retirement. What makes a deferred annuity “deferred” is the lapse in time between when the final installment is paid and when the payout period begins. 

Want To Know More?

Annuities are personalized based on the needs of the annuitant. That is why annuities are, to some, the best retirement plan on the market for low-income workers. Your retirement plans should not depend on your employment. Begus Insurance Group agents are experts at guiding potential low-income annuitants through the process. For your free consultation, contact Begus Insurance Group today!