Many insurance companies offer deferred income annuities, also known as future income annuities or longevity annuities. When you understand how this type of lifetime income annuity works, you’ll know why it’s so important to choose the right company, and what you should look for.

How a deferred income annuity works

A deferred income annuity is a promise for future lifelong income. Here’s how it works:

  • You buy the annuity now with a portion of your savings.
  • At a future date chosen by you, the insurance company starts returning the money you put into the annuity in the form of monthly income payments.
  • The company promises to continue your income payments for the rest of your life, even if the total payments you receive add up to thousands more than you put into the annuity.

So when you buy a deferred income annuity, you’re trusting the insurance company to provide an income that starts in the future and continues for as long as you live.

How do you find a company you can trust?

Do your research. An annuity is only as strong as the company that stands behind it. Guarantees for your future annuity income are backed by the claims paying ability of the insurance company. You want to be sure the company is responsible and financially solid, so it will be there for you when you’re collecting your income. Here are some things to look for when evaluating the trustworthiness of an insurance company:

  • Reputation — Is the company well regarded in the industry? Is it often named in newspaper or magazine articles as an expert or a leader in the industry?
  • Experience — How long has the company been in business? How long have they been offering annuities? Are they a large provider of annuities? As in most areas, the more experience the better.
  • Financial stability — Insurance companies are rated for financial strength by independent rating services which assess a company’s long-term stability, cash reserves, history of meeting financial obligations and other factors. You may want to choose a company whose ratings are primarily in the highest category. Here are the four leading rating services and their top two ratings:

A deferred income annuity can be a great way to ensure an extra source of retirement income. As long as you do your homework to find a reputable company to buy from, your deferred income annuity can help make sure your retirement funds last as long as you do.

Learn more about annuities in the New York Life Learning Center, or call 1-800-313-6841 to have your questions answered by a knowledgeable representative.