Want To Retire Early? 3 Ways Annuities Get You There

Do you want to retire early? More and more Americans are choosing to retire early, sometimes even with a committed mindset known as FIRE (financial independence, retire early). If you want to become one of their ranks, an annuity is a vital tool to consider. Why? Here are three ways that an annuity could help you achieve your early retirement dreams. 

1. Fill the Retirement Age Gap

Early retirees not only must plan for withdrawals for much longer than those retiring at traditional ages, but they must also fill a multi-year gap before some income sources are available. If you plan to retire before age 62, for instance, you generally cannot access Social Security to supplement your retirement withdrawals. Pensions often have similar rules. 

An annuity can fill this gap. In this scenario, you might purchase an annuity that provides a similar income to your future monthly payment. However, rather than a long-term annuity payment, purchase a plan that pays out only until you can access the next source of income. 

2. Supplement Overall Income

Annuities are highly customizable, so you can buy one for as short or as long a period as you want. This makes them an effective alternative for the many American workers who no longer have access to employer-sponsored pensions.

Replace a traditional pension by setting up one for yourself through an annuity. This means a guaranteed paycheck — either with a fixed or variable rate of return — for decades if you wish. Yes, the amount each month will be smaller than an annuity with a shorter term. But it gives peace of mind in particular to those who want to pull the trigger on retirement earlier. 

3. Delay Social Security or Pensions

Both Social Security and many public or private pensions reward workers who wait to start their payments. Currently, Social Security's full age for retirement is 70. While you can claim it as early as 62, your checks will be larger each year you delay. So, rather than using income sources as soon as they become available, consider using an annuity to bolster your finances until you can maximize these checks. 

Where to Start

Which of these methods of using annuities to reach early retirement goals should you pursue? The answer is unique to each early retiree. One place to begin is to meet with an annuity advisor in your state. With their expertise and research tools, you'll soon find your best path to financial freedom in the near future.