Annuities are long-term investments, issued by an insurance company and purchased through a licensed financial professional, that are designed to deliver income in the future.
Benefits of annuities for small businesses
While annuities are included in many personal financial plans, they may also help small business owners plan for their retirement, the continuation of their business and their employees’ future.
Part of your retirement income strategy
Having an annuity in place enables you to retire and transition your business to the next generation without having to sell. Here, the income stream generated from the annuity is used to create retirement income, leaving the business to continue functioning as it was before you stepped away.
Buy/sell agreement funding
You can also use an annuity to establish a buy/sell agreement to ensure that your business can continue running smoothly in the event of the death, disability or retirement of you or one of your partners. In this arrangement, you and your business partner will own contracts on each other.
All partners agree to the buy/sell triggering events, price and payment terms. When a triggering event occurs, the annuity proceeds can be used to purchase the impacted partner’s business interest.
Employee retirement benefits
Having a way to stand out among the competition can be helpful when you’re trying to recruit, reward and retain key employees. Offering your employees a supplemental retirement plan using an annuity may help.
For this strategy, you purchase an annuity contract on the employee. They would be the owner and annuitant and would get to select the beneficiaries. This option allows you to offer them an additional source of supplemental income for retirement that they may not have access to with other employers.
