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Retirement & savings


Funding the retirement you envision takes planning

Whether you are still saving for retirement or shifting your focus from building wealth to generating retirement income, it’s important to think about how much your chosen retirement lifestyle will cost and ultimately how you will fund that lifestyle. At Merrill, we believe it starts with a disciplined retirement income plan built around your goals and priorities.


We can help you define your retirement income goals and set priorities, including establishing a goal for essential day-to-day expenses that is separate and distinct from goals for more important and aspirational expenses. This allows us to help you align your income sources and retirement savings to each goal. This process can help you increase the chances of achieving your goals and help your retirement savings last a lifetime.


The role of annuities in a retirement portfolio

An annuity is a contract with an insurance company that is specifically designed for retirement purposes. When you purchase an annuity, you make a payment to an insurance company, that, in turn, agrees to pay out an income stream or a lump-sum amount at a future date. When used as part of your retirement portfolio, an annuity may provide you:


  • Lifetime income

    Annuities are designed to deliver a predictable income stream that you can use to help cover your essential living expenses.
  • Downside protection

    Annuities may help protect you from down markets with full or partial guarantees on your principal, backed by the issuing insurance company.
  • Tax efficiency

    Annuities allow you to accumulate assets that can grow in a tax-deferred manner, potentially helping you accumulate more assets to fund your retirement lifestyle.

Lifetime income

When used for income, an annuity can add an element of predictability to your portfolio and help you better weather a variety of market conditions over a retirement that may last 30 years or more. Combined with other predictable income streams, like Social Security and pension income, an annuity can help give you the confidence that you will be able to meet your essential day-to-day expenses throughout your retirement. Annuities can also provide married couples with an important income stream that will continue after one spouse has passed away. A careful evaluation of your retirement income sources and projected expenses can help you determine if an annuity might be appropriate.


Annuity offerings for income

Income Annuities


  • Offer a lifetime income stream that will start on a future date chosen by you at the time of purchase.
  • Unlike other types of annuities, there is no savings component or liquidity.
  • Once purchased, you give up access to your principal in exchange for the income stream guaranteed by the insurance company.

Fixed Indexed Annuities with Income Benefits


  • While indexed annuities are not a direct investment in the stock market, they offer investment growth potential through returns tied to the performance of market indices, such as the S&P 500®, over a variety of time horizons.
  • Gains accumulate in a tax-deferred manner and are tied to the index with a cap, so growth may be less than the actual market gains.
  • Provide 100% principal protection against market risk, which can help protect you from market downturns and preserves your retirement savings.
  • Lifetime income benefits, available for an additional cost, provide somewhat lower income than income annuities, but you will retain some liquidity.

Variable Annuities with Optional Income Benefits


  • Allow you to participate in the markets by offering a wide range of professionally managed investment options aligned with your risk tolerance and time horizon.
  • Can update your investment options to rebalance or change your asset allocation strategy while continuing to defer taxes on growth.
  • Offer you more growth potential than fixed rate annuities, but the value of your annuity is subject to market risk and will fluctuate based on the performance of the investment options chosen. Your investment may be worth more or less than its original cost.
  • Optional lifetime income benefits, available for an additional cost, provide a guaranteed minimum level of lifetime income with some liquidity. The starting income amount will typically be lower than what is available with fixed indexed annuities, but there is greater potential for the income amount to grow over time based on your investment performance.

Downside protection

Volatility in the market can add an additional level of complexity to retirement planning. Many investors are understandably concerned about the security of their retirement portfolio and ultimately their ability to generate sufficient income to last throughout retirement.  Allocating a portion of your retirement portfolio to certain types of annuities can provide downside protection of principal against market losses.  Annuities can provide full or partial protection of principal through guarantees provided by the insurance company when you purchase the annuity contract. Some can even offer this protection along with an opportunity for meaningful asset growth during positive markets.


Annuity offerings for downside protection

Fixed Annuities


  • Offer a pre-established, guaranteed rate of return for a specified period.
  • Feature a variety of timeframes, so you can select the guarantee period that is right for you.
  • At the end of each period, you can withdraw your savings or elect a new guarantee period at the current rates being offered, helping you protect retirement assets with guaranteed returns.

Fixed Indexed Annuities


  • Offer investment growth through returns tied to the performance of market indices, such as the S&P 500®, over a variety of time horizons.
  • Gains accumulate in a tax-deferred manner and are tied to the index with a cap, so growth may be less than the actual market gains.
  • Provide 100% principal protection, which can help protect you from market downturns and preserve your retirement savings.

Variable Indexed Annuities


  • Offer tax-deferred investment growth through returns tied to the performance of market indices, as well.
  • Provide limited downside protection primarily through the use of buffers or floors. Your principal is only at risk on any market losses during an index period that exceed the buffer (typically a loss of 10 to 30%) or first losses up to the floor (typically 10%), but your upside growth opportunity is generally higher than the cap rates offered by fixed indexed annuities.

Before purchasing any annuity, you should discuss with your Merrill Advisor the annuity’s costs, risks and how any crediting strategies and benefits are calculated.


Tax efficiency

Earnings from investments held in all annuities grow on a tax-deferred basis, meaning you are taxed only when you make withdrawals or receive income. This can help reduce the impact of taxes on your portfolio while you are saving and put more of your money to work.


If you have maximized your contributions to retirement plans such as IRAs or 401(k)s, annuities may provide an additional way to increase tax-deferred savings for retirement.


Because IRAs and other retirement plans already offer tax-deferred savings, you should purchase an annuity in such a plan only if you want other benefits an annuity offers, such as income guarantees or death benefit guarantees.


The guarantees under an annuity contract are backed by the issuing insurance company.


It all starts with a conversation

Talk to your Merrill advisor about the role annuities might play in your retirement plan. Your advisor will work with you to assess your goals, risk tolerance, investing style, time horizon and liquidity requirement to find an appropriate income strategy to meet your needs and review your strategy periodically to help you stay on track towards your goals.



Things to consider

  • What will your retirement lifestyle be like and what will it cost?
  • Are you prepared to create your own retirement paycheck from your investments?
  • Do you want to reduce your risk by protecting what you've saved until you're ready to retire?


What is an annuity?

Are annuities taxable?

What are the different types of annuities?

Are annuities FDIC insured?

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All annuity contract and rider guarantees, or annuity payout rates, are backed by the claims-paying ability of the issuing insurance company. They are not backed by Merrill or its affiliates, nor does Merrill or its affiliates make any representations or guarantees regarding the claims-paying ability of the issuing insurance company.


Withdrawals of taxable amounts are subject to ordinary income tax and, if taken prior to age 59½, an additional 10% federal tax may apply. Keep in mind, for retirement plans and accounts (such as IRAs and 401(k)s), an annuity provides no additional tax-deferred benefit beyond that provided by the retirement plan or account itself.


Annuities are long-term investments designed to help meet retirement needs. They are a contractual agreement where a client makes payments to an insurance company, which, in turn, agrees to pay out an income stream or a lump sum amount at a later date. Annuities typically offer (1) tax-deferred treatment of earnings; (2) a death benefit; and (3) annuity payout options that can provide guaranteed income for life. There are contract limitations, fees and charges associated with annuities which include, but are not limited to mortality and expense risk charges, sales and surrender charges, administrative fees, charges for any optional benefits, and charges for the underlying investment options in variable annuities. In addition, variable annuity contract values will fluctuate and are subject to market risk including the possible loss of principal. It is possible to lose money in a variable annuity purchased with an optional protection rider. Variable annuities have holding periods, limitations, withdrawal charges, exclusions, termination provisions, and terms for keeping them in force. Optional riders may be irrevocable and expire without use. Early withdrawals may be subject to surrender charges, and taxed as ordinary income, and in addition, if taken prior to age 59½ an additional 10% federal tax may apply. Withdrawals reduce annuity contract benefit, values and optional guarantees in an amount that may be more than the actual withdrawal.


It is important to note that indexed annuity contracts commonly allow the insurance company to change the participation rate, cap rate, and/or spread rate on a periodic — such as annual — basis. Such changes could adversely affect your return. No single index crediting method will provide the highest interest credit in all market scenarios. The guaranteed minimum cap rate/maximum spread rate are established when the annuity is purchased and disclosed in the annuity contract.


Standard & Poor’s S&P 500® Index is a registered trademark of Standard & Poor’s, a division of the McGraw-Hill Companies Inc.©



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