Annuity laddering is a great way to increase your IRA income.  There is an unlimited amount of risky ways to increase your income if you are ambitious but annuity laddering is a catch all safe and easy way to create a larger and more dependable income stream.  Understanding the concept is the first step.

The concept of annuity laddering is basically to invest in longer term rates that earn higher interest. But wait, the laddering part is the process of how it is accomplished.   You start with short term annuities, 3-5 years. You can even start with CD’s if that term is too long for your comfort level. Just don’t use this concept for short term money that you need before the surrender charges are up on the 3 or 5 year annuities.   Annuity laddering is a long term income plan.

Annuity laddering works by creating an income stream to be delivered over a 3-5, 5-10, and a 10-15 year period. For example, if you were to invest in a 5 year immediate annuity you would get 5 years of monthly payments. If you need $2,000 per month in income, you would need to invest a little less than $120,000 depending on which annuity company you used.  This income would come in every single month for 5 years.

At the same time, you would purchase another annuity that would grow for 5 years and then pay income for 5 or 10 years.  At the end of the first 5 years you turn the income on for the second annuity and your income is then guaranteed for 5 – 10 more years. 

You would also purchase a 10 year annuity that would grow and then pay income when the second annuity ran out.  See how the basics work? It is simple once you get the hang of it.

How annuity laddering increases your IRA income is also simple once you understand the basics.   Remember, the premise is the use longer term investments while still keeping money available to use in the case of an emergency.  It is available to use unless turned into income. So in the beginning 2 of 3 annuities would have money available to use. You never want to touch your income producing assets but sometimes it is unavoidable and serious emergencies will sometimes wipe out your emergency fund pretty fast.

Using longer term investments will almost always increase your IRA income because longer term means higher interest and more perks from the insurance company.  But also remember that each income term pays out interest and principal. Since annuities are guaranteed to never lose money then your income is safe and there is no reason to just use interest anymore. Also remember you will have several annuities that are growing in value replacing your principal balance over time while allowing you to enjoy a much higher income right now.

Annuity laddering can increase your IRA income very quickly. Remember to only invest the exact amount needed to produce your desired income level for each period of time.  You can then use your other investment money to complete the ladder and keep using longer term products or even invest it in the market. Since your income generating assets would be completely guaranteed there would be no reason to worry about the day to day ups and downs of the market.  Take a look, it might work for you!

Disclaimer: Always seek individual advice from a licensed professional. This article is for general information purposes only and is not a substitute for personal advice.

Annuity Laddering Creates More IRA Income
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