Most of us carry some type of insurance be it health, fire, home or car insurance but how will these protect you against the most serious risk you face in today’s retirement: Out living your assets
Purchasing an annuity can be a great way to guarantee your retirement income for as long as you live. It can also protect your assets from inflation, stock market fluctuations, a serious medical crisis or other unforeseen circumstances. An annuity can help bolster your retirement financial plan by guaranteeing your retirement income.
Think of an annuity like a pension you might purchase. You pay a lump sum or payments over time. In return you receive monthly income for a specified period of time or for the rest of your life – no matter how long you live. This is the annuity guarantee.
There are many types of Annuity products that can be structured to strengthen your retirement financial plan. In many cases, the best type of annuity for retirement is a fixed lifetime annuity with an annual Cost of Living Adjustment that protects your income from the affects of inflation. A fixed lifetime annuity gives you an income stream for the rest of your life – no matter how long you live and it offers a guaranteed payment – regardless of stock market performance.
For many, Annuity products can provide exactly what most retirees need – guaranteed income. However, there are downsides to an annuity. For example, as a trade off for the income guarantee, an Annuity locks up your capital investment. You lose flexibility but gain your guaranteed income.
There are a number of variables that make Annuities a puzzling product. For starters, there are many types of Annuities. What may benefit one may not benefit another. Understanding Annuity features and how they fit into your overall retirement plan needs to be discussed and analyzed. You will also want to consider where to purchase your annuity and which options to include on the contract. Educating yourself is the first step, talking with a trusted professional is a logical second step.
With the right understanding of annuities, it may very well be the most valuable tool in your retirement.