Can I Buy a Pension Annuity With Savings?

Can you buy a pension annuity with savings?

Yes.

You can use savings, checking account money, or other non-IRA money to buy a pension-style annuity that creates guaranteed lifetime income.

Key Takeaways

• You can buy a pension annuity with savings
• Pension annuities are lifetime income products
• Non-IRA savings can be used for Immediate Annuities, Deferred Income Annuities, and Income Riders
• QLACs can only be used with traditional IRA money
• Non-IRA lifetime income is usually a combination of return of principal plus interest
• The goal is to fill your income gap using the least amount of money possible

What Is a Pension Annuity?

A pension annuity is an annuity designed to provide lifetime income.

There are four main types:

• Single Premium Immediate Annuities
• Deferred Income Annuities
• Qualified Longevity Annuity Contracts
• Income Riders

These are pension-style annuities because they can pay for as long as you are breathing.

Using Savings to Buy Lifetime Income

If you use savings, checking account money, or other non-IRA money, that is considered non-qualified money.

That money can be used to buy a pension annuity.

The income stream is usually made up of:

• return of principal
• interest

You only pay taxes on the interest portion until the principal has been fully returned.

Example of How the Taxes Work

Let’s say the annuity pays $5,000 per month.

If $4,000 is return of principal and $1,000 is interest, then you receive $5,000, but only the $1,000 interest portion is taxable.

That is one of the benefits of using non-IRA savings for lifetime income.

Protecting Beneficiaries

You can also structure the contract so that if you die early, unused money goes to your beneficiaries.

That is called a backstop.

Most people do not choose life-only payments.

They want lifetime income, but they also want their family protected if something happens early in the contract.

Solving the Income Gap

Start with your income floor.

Add up what is already coming in each month:

• Social Security
• pension income
• dividend income
• rental income
• other reliable income sources

Then identify the gap.

If you need an extra $1,000 per month, quote for that number.

Use the least amount of money possible to solve for that income contractually.

Where to Compare Pension Annuity Quotes

If you want to see how much lifetime income your savings could generate, you can compare quotes using our annuity calculators here:

https://www.stantheannuityman.com/annuity-calculator/

The Bottom Line

Yes, you can buy a pension annuity with savings.

You can use non-IRA money to create guaranteed lifetime income.

The key is to define your income gap, compare all carriers, and structure the contract so it solves your specific retirement income need.

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