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Should a 70-Year-Old Buy an Annuity?


Buying an annuity at age 70 may bring a steady income, but you may not get the bang for your buck that you’re looking for, depending on your lifespan and terms of the annuity. The decision to buy an annuity at 70 is a complex one and hinges on an individual’s unique financial situation and retirement goals.

In fact, it’s often beneficial to consult with a financial advisor in making any big decisions about your retirement. 

Benefits of Buying an Annuity at Age 70 

The key advantage of purchasing an annuity at 70 is the guarantee of a steady income stream. An annuity is an insurance policy designed to provide a consistent flow of payments, unaffected by market fluctuations. This guarantees financial certainty for many retirees. However, it’s essential to remember that the benefits can vary for each individual, as there is no one-size-fits-all solution in retirement planning.

Another exciting feature of annuities is tax-deferred growth. The money you put into an annuity grows without being taxed until you start receiving payments. More than being a potential catch for you, running towards retirement in a high tax bracket, it becomes an advantageous tax shield. This is less important, however, once you’ve reached the age of 70. 

Moreover, an annuity can provide protection from volatile market changes, depending on its type. This security combined with the guaranteed income for the rest of your life are the best benefits once you hit retirement, especially the age of 70.

Disadvantages to Buying an Annuity at Age 70 

A 70 year old couple buying an annuity

Conversely, potential downsides exist in buying an annuity at 70. One of the possible disappointments is not being able to realize some of the best benefits of an annuity, such as the tax-deferred account and the length of time you’re able to receive payments.

Another possible downside is high fees associated with some annuities that can gradually reduce your investment’s value. Think of management fees, risk charges and surrender fees as slow leaks that can empty your bucket over time. The fees you’ll pay will depend on the type of annuity you buy and the company you are working with.

Thirdly, consider the lack of liquidity of annuities. While you won’t have to worry about early withdrawal penalties, you can’t get a large lump sum whenever you want out of an annuity when you buy, so it’s important that you’ll have enough money for other investments or things you may need. 

Types of Annuities to Buy 

When familiarizing yourself with the various types of annuities for retirement planning at 70, think of them as different baskets meant for different needs. The right one for you might be very different than someone else and your age may or may not be a factor. Here are some of the most common types of annuities to consider.

  • Immediate annuities begin paying out instantly after your initial investment and might be the right call for many people buying at the age of 70. This can be appealing to those who need an instant source of funds, which is likely you if you’re considering an annuity this late in life.
  • Deferred annuities are long-term investments in which you invest a sum of money, then receive payments several years down the line after the initial sum has accrued interest.
  • Variable annuities allow you to invest your payments in different avenues akin to betting on several horses in a race. These annuities can offer growth potential but also carry more risk.
  • Fixed annuities act like a timed-release pill, guaranteeing particular returns for a specified period and ensuring a stable of predictable income.
  • Long-term care annuities, like an emergency kit, can provide additional benefits if you fall seriously ill or become disabled, potentially covering some of the high costs associated with long-term care. This can be a great way to protect family members from the costs of anything that may happen to you.

It’s worth exploring the types of annuities you think might be a fit for your needs with a professional, such as a financial advisor. They will be able to analyze your personal financial situation and help you make the right choice. 

How an Annuity Could Impact Retirement After 70 

Annuities can supplement your existing income sources such as Social Security or pensions. However, remember that the game of estate planning also comes into play. The unexpected departure of the annuitant may halt these regular payments, which pass onto the heirs but potentially get whittled by the estate and income taxes. 

If you buy an annuity at 70 then you may have less liquidity to invest or use for travel. However, you should be able to have a set income that you can rely on every month for the rest of your life. This can be a great way to fund your retirement without having to worry about finances. It will absolutely change the way your finances operate if you don’t have more cash on hand than what you’re receiving from the annuity. 

Bottom Line

A 70 year old couple deciding to buy an annuity

Approaching the decision for an annuity purchase at 70 requires a balance between, on the one hand, getting a guaranteed income stream as well as a tax shield and, on the other hand, possible drawbacks like high fees or liquidity limitations. Add potential income options like Social Security, pensions and retirement savings accounts into the larger equation and a clear image starts forming. The right choice for you is going to depend on how your entire financial picture looks. 

Tips for Retirement Planning

  • Planning out where your income is going to come from in retirement can be tough if you’re not an expert. Working with a professional like a financial advisor can help you assess your situation and make a plan to reach your goals. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now
  • If you’re not sure whether you’ve saved enough for retirement, are on track, consider using SmartAsset’s free retirement calculator tool. 

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