Planning for retirement opens the door to many questions that seem open ended and hard to answer. What will you do with your retirement years? Will you outlive your money? Is your money safe?
If you haven’t taken the proper steps to plan for retirement, then you might feel stressed as you read this. There are different phases of retirement planning. First, there is the accumulation phase where you are working and constantly adding money into your retirement bucket. Next, there is the red zone where you are within 3 years of retirement. This phase continues through the 3 years after retirement. Finally, there is the distribution phase where your money is being distributed to you in retirement.
The accumulation phase allows you to take more risk as you have many years to continue contributing money, but your mindset needs to change as you approach the red zone.
There are a few different ways to reduce your risk as you approach retirement. One way is through purchasing annuity products.
Annuity Pros:
Fixed annuities or fixed indexed annuities should make up some portion of your portfolio if you are nearing retirement. They are more conservative vehicles than stocks since they ensure you will not lose money but still allow you to earn. You can’t afford to lose money as you near retirement, but you also can’t afford for your money to plateau. Immediate annuities allow you to take a lump sum and turn it into an income stream that you can’t outlive providing you with peace of mind.
Annuity Cons:
Annuities have a surrender period. The surrender period is a set period during which a financial penalty will be imposed for removing your funds. The reason for this is that the annuity company needs to have a certain amount of time to invest premium and let it grow in order to be able to guarantee the payouts for life.
If you want your money to be safe in retirement, then you need to start considering the products that you will need during that phase of life. A solid financial plan is truly diversified. Annuities are just one component of a solid retirement plan. There is quite a bit more information than can be conveyed in one article written in general terms. Contact our office located in Paducah, Kentucky for answers to additional questions on annuities and/or retirement planning specific to your situation.
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