The Role Annuities Can Play In Your Retirement Planning
The benefit of guaranteed income from an annuity is just that: you will have a steady check coming in for the rest of your life. This is probably not the entire solution for your retirement planning but it may be a valuable part of it.
Why are income guarantees so important? They establish a floor of income – in addition to Social Security and pensions – that you can’t outlive. They also help address each of the three risks in retirement.
Risk #1: Outliving Your Savings
Annuities are unique and valuable because they address the risk of living a long time. The income from your annuity will last as long as you do.
Risk #2: Reduced Purchasing Power in the Future
If you have a strong base of guaranteed income, you can invest the rest of your portfolio in ways that have more risk but bring higher returns. This is a great protection against future inflation, since you may need to rely on withdrawals from your portfolio to keep up with rising costs of living over time.
Risk #3: Market Losses Early in Retirement that Your Portfolio May Not Recover From
With income from annuities and other guaranteed sources, you will not need to rely on your savings to pay the bills. If the stock market value goes down, you can give your investments time to recover before you need them in the future. This protects future income and helps grow the money you will leave to heirs.
Guaranteed Income in Different Flavors
Annuities can be a valuable part of your retirement income plan, addressing three big risks in retirement. When it comes to deciding exactly what kind of annuity and guarantee is right for you, you’ll want help from a financial professional who can figure out the strategy that best fits your goals.
There are different types of annuities that provide guaranteed income, and you may get guidance on using one or more of these as part of your plan. It’s helpful to understand that some annuities provide higher guarantees that remain steady throughout your life while others offer guarantees with the possibility of increases over time. Generally speaking, a greater potential for increase comes with a lower guarantee.
There are also other valuable features of the annuity that may make a particular contract work for you, such as additional benefits for long-term care or life insurance that does not require underwriting. You’ll need to discuss these details with your financial professional.
Annuities can be a powerful tool to help you retire with the assurance that your income will last a lifetime. When you’re putting together a comprehensive financial plan, they give you the freedom to increase the growth potential of the rest of your savings and meet the risks of retirement with confidence.
Annuity Alliance can provide an insurance professional to discuss potential annuity options that align with your retirement planning goals. Contact Annuity Alliance for more information.
We are sharing this article as information only and should not be used to make a financial decision.