Since 2014 the number of Americans retiring has increases to 4 million annually, more than 10,000 a day. From 2014 to 2034, about 80 million seniors are expected to retire which will strain Social Security and Medicare systems with the potential to lead to increased reductions in benefits.
Couple this increase in the retirement ranks with people living longer and there is a potential recipe for financial disaster. A disaster if you haven’t properly planned for retirement.
Stock market investing can lead to market exposure which may cause assets being placed at market risk. Deciding on which assets to buy in the stock market could be a gamble simply due to time constraints. Would you have enough time to recover potential losses from a market downside?
Many people turn to the safety and security of annuities to help put those fears to rest. An annuity is ‘peace of mind’ investing for many people because market risk is eliminated.
A fixed indexed annuity (FIA) is issued by an insurance company with contractual guarantees. Interest performance is tied to an index such as the S&P 500 Stock Index to determine overall yields, however no FIA is exposed to market risk. When the market index is down your retirement assets do not participate, they are protected against losses. When the market rises, your account participates in gains based on the contract restrictions. With a Fixed Indexed Annuity, you experience only increases and never decreases in your account value.
This leads to a big question many investors have: “What happens if the insurance company who I purchased the annuity from experiences business problems?”
Insurance companies are the most highly regulated entities in any financial category. Each individual state department of insurance is responsible for the overseeing of the financial health of the individual insurance company doing business in their state. This “states’ rights” approach to insurance product safety has worked well for over 100 years. If you would like more information about how this system works and how the individual annuity owner is protected, here is a link: https://www.nolhga.com/policyholderinfo/main.cfm
Again, a fixed annuity is peace of mind investing. Think of an annuity as Sleep insurance. When your funds are safe and secure, you sleep better.
Learning how an annuity can help you remove market risk and protects your important retirement funds requires basic research and information. The right choice of the annuity can be tailored to your portfolio and financial situation.
Is an annuity right for you? It depends on your unique circumstances, risk tolerance and how you want your money to work for you.
An annuity achieves the following:
- Lifetime income for retirement
- Protection against stock market risk
- Access to guaranteed income when the time arrives
- Legacy planning
There are many ways to explain how an annuity can provide safety and security in your retirement planning. Annuities are also called an auto-investment: Invest and relax.