p you decide where risk belongs.
If you’d like to learn more about how fixed indexed annuities may fit into a retirement income strategy, you can learn more here:
For most of your working life, market volatility is primarily an investment problem. In retirement, it can become an income problem.
If you’re still working and the market falls, your paycheck typically continues. You may have time to wait for investments to recover. But once retirement begins, your portfolio may be responsible for producing part of that paycheck.
If a market downturn happens while you’re taking withdrawals, you could be forced to sell investments at depressed values simply because you need income. That is why the years leading into retirement are an important time to think about building a retirement safety net.
Start With the Income You Need
The goal isn’t necessarily to make your entire portfolio conservative.
Instead, start by identifying the income you want to be able to rely on regardless of what the stock market is doing. Social Security and pensions may already provide part of that foundation.
For some retirees, a fixed indexed annuity may also be used to help create predictable retirement income, including certain options designed to provide income for life.
The idea is straightforward: Protect the income you cannot afford to lose.
Once that dependable income foundation is established, other assets can be managed for different purposes. Some may remain invested for long-term growth. Some may stay liquid for emergencies and larger purchases. Others may be positioned for tax planning, legacy goals or future health-care needs.
Safety and Growth Can Work Together
Retirement planning is sometimes presented as though you have to choose between safety and growth.
You don’t.
A retirement that lasts 20 or 30 years may still need meaningful growth. But the money responsible for creating your basic retirement income does not necessarily need to take the same risks as money you won’t need for many years.
This is where having a retirement safety net can be valuable. If part of your income is coming from dependable sources, you may have more flexibility to allow growth-oriented investments time to recover during market downturns instead of selling simply to fund your lifestyle.
That can help turn market volatility from an immediate income problem back into what it was during your working years: A long-term investment consideration.
Give Your Money Different Jobs
A retirement portfolio does not have to function as one large bucket.
Different assets can serve different purposes. Some money may:
- be responsible for producing dependable income.
- be positioned for growth.
- provide liquidity.
- support legacy, tax or long-term-care objectives.
The key is making those decisions intentionally.
For some households, a fixed indexed annuity can be one tool used to help establish the dependable-income portion of that plan.*
The broader principle, however, applies regardless of which tools are used: the closer you get to retirement, the more important it becomes to separate the money you need to depend on from the money you can afford to give time.
The Question to Ask Before Retirement
Instead of only asking: “Do I have enough saved?”
Consider asking: “How much of my retirement income is already protected?”
That question can reveal weaknesses in a retirement plan that an account balance alone may not show. Building a retirement safety net before you need it can give the rest of your financial plan something extremely valuable: time and flexibility.
And in retirement, both can matter just as much as investment returns.
If you’d like to learn more about how fixed indexed annuities may be used as part of a retirement income strategy we highly recommend attending an upcoming dinner presentation where you can learn more!
Source: Kiplinger
*Guarantees associated with annuities are backed by the financial strength and claims-paying ability of the issuing insurance company. Fixed indexed annuities vary by carrier and contract and may include surrender charges, limitations on withdrawals, caps, participation rates, spreads and optional riders with additional costs. Lifetime income generally requires specific contract provisions, annuitization or an applicable income benefit. Annuities are not appropriate for every investor.
