Annuities Offer Income Stability

We recognize that the current generation of retirees and baby boomers face a unique set of retirement income concerns.  If you are nearing the age of retirement, or if you have recently retired, you are faced with many decisions on how to continue to live your life without worrying about money. 

Most retirement plans significantly affect today’s changing market. This is one of the things that makes the asset allocation so much important for a successful retirement investment. Those of us who prefer to not run out of money before we die should consider additional factors. There is no escaping old age but those who plan for it financially could ease the process considerably.

•How much retirement income will come from guaranteed sources such as pensions, annuities or social security? The greater your percentage of overall guaranteed income, the better.  If the challenges faced by many present-day seniors is any indication, quality of life is likely to become even more directly tied to one’s ability to finance it.

•Will any guaranteed source of income keep pace with your inflation let alone someone else’s ever-changing definition? Your portfolio will have to do double time if not. It is important to divides costs into two other groups: Discretionary and Essential. 

Defined-benefit pensions, Social Security payments and annuity income would fall under lifetime income sources. They would be used to pay essential expenses, including food and housing.

Meanwhile, income from assets — a 401(k), an IRA or taxable income — would cover discretionary expenses.

•How long will you live? I would not want to bet my retirement lifestyle that living to age 100 was out of the question. Average lifespan means many people live a lot longer. The average 65-year-old man has a 50% chance of living to 85 years, and average 65-year-old woman likely to live for 88 years. This means that more than 20 years of retirement – or more than half the length of an average career.

•Are you able to adjust spending significantly enough to allow for any decreased portfolio values to recover? This assumes that you have a buffer in the size of your portfolio or that you have plenty of discretionary spending.  Key considerations for pre-retirees and retirees are to develop a financial plan based on the estimates of expenditure and resources, and develop a plan to extend the life of your assets.

•Are you able to consistently stay invested? A 3 percent certificate of deposit or bond coupon may be part of a prudent plan but may not allow you to consistently keep pace with your inflation.  Equity Indexed annuities offer consumers what could be described as the best of both worlds. A market based investment with potentially attractive returns plus a guaranteed minimum return.

Finally, I would be remiss if I did not point out the elephant in the room. Do you really know what your actual expenses are in retirement, and do your actual expenses take into account periodic large purchases, such as vehicles, vacations or a new roof?

Retirement Annuities are an investment, which can offer an income you cannot outlive and provide a solution to one of the biggest financial insecurities of old age, the fear of outliving one’s income. This is one option that makes sense because it is a “guaranteed annuity.” This is when a person is paid a guaranteed flow of money (based on an agreed investment) that provides a regular income for as long as they live. 

This option offers peace of mind. You know that whatever happens in the economy, you will continue to receive a steady income.

Annuities also provide a decent interest rate as well as tax deferral benefits which makes it a competitive alternative to banks. Additionally, remember it also provides a guaranteed income.  With an annuity, you have guaranteed stability.  

Annuities enable you to put away some funds while you guarantee your post retirement funds. These annuities will grant you another source of income.  Annuities do not require any upfront fees. Because of that, the insurance company will require a lengthy term of investment.