VIDEO: Annuities in Retirement – When They Make Sense
In this video I am going to discuss annuities in retirement, and when they make sense. Do annuities and retirement go hand-in-hand? Well, not always. But, annuities can do things no other financial product can, and they certainly serve as a great way to secure income in retirement. Here are 4 situations where annuities make the most sense in retirement.
#1 When you want guaranteed income for life. Annuities are a smart bet for people who prioritize having a base income as they age. Most annuities come with the option to create a consistent income stream that lasts for your entire life, which I feel is critical when it comes to longevity planning and helping ensure you don’t run out of money in retirement.
#2 When a low-risk portfolio is a top priority for you. Guaranteed income is nearly synonymous with low-risk; so if you’re wanting to be safe rather than sorry, annuities are a great option. As an alternative asset class, most annuities can add some degree of protection to your retirement nest egg and not only help diversify your portfolio, but help reduce it’s volatility.
#3 When you want a tax-efficient way to protect your assets. Purchasing an annuity with a portion of your investment assets can provide you with some tax advantages. Especially if you’re not planning on taking all the money out for awhile. Since annuities are considered tax deferred assets, like IRA’s, 401ks, TSP’s etc, the money typically grows tax deferred until you begin withdrawing the money. This could potentially allow you to lighten your tax liability in retirement. You might want to speak to your tax advisor to see how this could benefit your particular situation.
#4 When you want to create your own “pension”. In today’s environment, fewer and fewer people are able to benefit from employer pensions, or even if they have one, it may not be enough. This could leave many people struggling to find that reliable lifetime income stream in retirement. But, with the lifetime income that annuities provide, they can act very much like pensions and help create another stream of reliable and dependable monthly cash flow to help cover your bills and maintain the same financially-sound lifestyle you imagine.
As you can see, annuities are pretty versatile. They bring certainties to an uncertain financial plan and investment portfolio. However, choosing the wrong annuity can turn out to be a huge mistake. They come in various shapes and sizes and have a lot of moving parts,so If you are considering an annuity, I highly recommended you seek out a financial professional that specializes in annuities. The right advisor should be able to help you navigate the waters and select the correct annuity for your particular situation.
