When people think about annuities, they often picture purchasing one right at retirement. And while that’s certainly a good option, buying an annuity before retirement can unlock even greater benefits.
Let’s explore why deferring your annuity income for just a few years—or even a decade—can dramatically increase your lifetime payouts.
Need help choosing the best annuity for your unique situation? Have questions about getting an annuity? If so, it’s best to speak with an annuity specialist. Watch this short video to see how I can help you do this (at no cost to you!)
Tip: See how much an annuity could pay you using our annuity calculator.
Why Timing Matters with Annuities
The biggest advantage of buying an annuity before retirement is the power of deferral. By giving your annuity time to grow before taking income, you can set yourself up for significantly higher guaranteed payments for life.
👉 For example:
- $500,000 invested at retirement age (around 60) with income starting right away may provide about $32,000 per year for life.
- Waiting just two years before starting income increases payouts to about $39,000 per year.
- Waiting five years boosts that to about $52,000 per year.
That’s the power of letting the income rider work in your favor.
What If You Buy at 55 Instead of 60?
Now, here’s where it gets interesting. Let’s say you’re 55 years old and planning to retire at 60. If you put $500,000 into an annuity today instead of waiting until age 60, you could start income at retirement with around $47,000 per year—instead of $32,000.
That’s a massive difference for doing the same thing with the same money.
💡 Pro Tip: Buying earlier allows you to take advantage of guaranteed growth rates inside the income rider, often compounding at 8% annually for 10–12 years.
What Happens If You Wait Until 65?
If you buy an annuity at 55 and wait until 65 to take income, your payouts can look even better:
- Instead of $52,000 (from a 60-year-old investing at retirement),
- You could receive about $74,000 per year for life.
That’s a $22,000 difference simply because you bought earlier and gave your annuity more time to compound.
Single vs. Joint Payouts
Annuities offer flexibility based on whether you want income for yourself only or for you and your spouse.
- Joint payouts guarantee income for both spouses’ lifetimes.
- Single payouts are typically higher—sometimes $5,000–$10,000 more per year—because they’re based on one life expectancy.
👉 Want help comparing single vs. joint payout options? Schedule a call with me.
Why Earlier Is Often Better
Buying an annuity before retirement:
- Locks in guaranteed lifetime income.
- Maximizes payout potential through compounding.
- Provides peace of mind, knowing part of your retirement income is secured no matter what the market does.
And remember, you don’t have to put all your money into annuities. Many people place a portion of their retirement savings into an annuity for guaranteed income, while keeping the rest in the market for growth.
Conclusion
Whether you’re a few years away from retirement or still a decade out, buying an annuity earlier can give you much higher guaranteed income for life. It’s one of the smartest strategies to create your own personal pension and retire with confidence.
👉 Watch the video to see how it works.
👉 Schedule a call to compare the best annuity options.