After a long commitment to your career, you’ve decided to retire from your daily 9-5 “grind”. Retirement looks promising, but you worry if you will have enough money to enjoy a good life. Does this sound familiar?
The average age for retirement in the US is 65 years of age, with some professionals clocking out from the workforce at age 62. But Gallup polls show that Americans worry most about having enough money for retirement. In fact, 71% of non-retired adults are at least moderately worried about being able to fund their “Golden Years”.
With a volatile market, it is important to diversify your retirement portfolio, especially when you are no longer working. Diversification is a growth strategy that involves expanding your investments into new markets, products, or services. It can help you increase your revenue, reduce your dependence on a single source of income and create a competitive advantage that gives you more confidence that your money will be there for you when you need it.
When the market is downturned, it is important to rebalance your portfolio. This means making regular adjustments to ensure you’re still hitting your target allocation over time. Rarely, do people keep their assets in one place throughout their entire life. When premium protection is paramount, annuities are a great option to consider.
Annuities offer income for life, which can give you peace of mind knowing that you will have a steady, reliable income that lasts as long as you live. In an era where life expectancies are continually increasing, annuities provide the safeguard against the risk of outliving your savings.
One of the biggest advantages annuities offer, is that they allow you to save a larger amount of cash and defer paying taxes. Unlike other tax-deferred retirement accounts such as 401(k)s and IRAs, there is no annual contribution limit for an annuity. Furthermore, the income benefits of annuities in today’s financial landscape are higher today, then they’ve ever been.
They say, “timing is everything”, which is why it is important to understand the benefits of different retirement saving options, and the impact they have on your long-term strategy. Rebalancing your portfolio is important, especially when there are opportunities to create more income, more money in the bank and more ways to beat inflation without risk.
When evaluating options for rebalancing your retirement savings, it is important to explore different products and their rate of return. Most people can get between 8.5% – 9.5% income benefits with annuities right now, while money markets are only paying 5% (still great compared to the past couple decades). For most people, annuities may require reallocation of funds, which can trigger some tax liability. But taxes are the lowest they’ve been in our lifetime and expected to increase in the near future. Whether you pay the taxes now or later, you will still pay taxes.
Annuities allow you to take income year after year, even if you don’t need it. Let’s assume the average yield on your annuity is locked in at 8%. You can make withdrawals yearly (for the rest of your life), pay the taxes (if required) at an all-time low rate, and put the unused income in a high yield interest account earning 5%+, until you do need or “want” it. Regardless, any tax you may pay will be less now, than if you wait to withdraw the income years down the road, when the tax liability will be higher. However you look at it, you will have guaranteed income, and liquidity at the same time.
