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have an annuity question?

How to prepare for your changing risks in retirement

When you are planning for retirement, it is possible that you may want to grow your money as much as possible so that you’ll ultimately have a bigger “base” to generate income from. Typically, this is accomplished by putting a certain percentage of assets into stocks, mutual funds, and other growth-related equities.

Unfortunately, though, with the opportunity for growth also comes the risk of loss… and the more value your investments or portfolio loses at a given time, the more return it must generate going forward in order to just get back to even.

Percent Loss versus Percent Return Needed to Recover

% of Loss% of Return Needed to Recover
10%11.11%
20%25%
30%42.85%
40%66.66%
50%100%
60%150%
70%233%
80%400%
90%900%
100%Broke

Other risks that you can face when investing for retirement include:

  • Low-interest rates
  • Sequence of returns (which could cause your portfolio to run out of money more quickly, based on WHEN various returns are received)
  • Taxes – especially if you have money invested in taxable investment accounts
  • Investment charges and fees

So, getting yourself TO retirement can certainly be a challenge. Once you get there, though, there can be different types of risks that you face.

Preparing for Financial and Income Risks After You Retire

Once you reach retirement, income is usually the name of the game. In fact, regardless of the size of your net worth, if you don’t have enough income to meet your expenses, then there’s a good chance that you may have to cut back on purchasing the items and services that you need and want.

One of the biggest concerns that is on the minds of many retirees today – as well as those who are planning for retirement – is running out of money while it is still needed. This fear continues to grow, as life expectancy is much longer now than it was even just a few decades ago… and this means that assets and income need to be stretched out for a longer period of time.

Going with a higher allocation of “safe” money alternatives like bonds and CDs might help you to keep your principal in-tact. But with such low-interest rates, these financial vehicles could end up providing you with a minuscule income stream. As an example, $1 million at 2% interest will bring in just $20,000 per year – and that is before taxes!

With that in mind, there are several risks that can befall you during retirement, such as:

  • Stock market volatility
  • Low-interest rates
  • Inflation/loss of purchasing power
  • Depletion of assets and income

The good news is that you may be able to generate growth, keep principal safe, and generate an income for the rest of your life, using one single financial vehicle – the fixed indexed annuity.

These types of annuities generate their return based on the performance of underlying market indexes, such as the S&P 500. Even though the upside growth may be limited by “caps” or “participation rates,” you could still generate much higher returns than those of more traditional investments. Plus, the growth that takes place is tax-deferred.

If the underlying index(es) perform poorly in a given time period, there is no loss incurred either to your principal or your previous gains. Therefore, these annuities can essentially provide you with a win-win scenario… but it gets even better!

As with other fixed annuities, the fixed indexed annuity can provide you with a reliable stream of income in retirement, either for a pre-selected period of time or even for the remainder of your lifetime. So, this can alleviate the concern about running out of money when it is still needed.

Although there are numerous benefits that are associated with fixed indexed annuities, these financial vehicles may not be for everyone. In addition, not all fixed indexed annuities are exactly the same. So, it is recommended that you have a good understanding of how these vehicles work before you make a long-term commitment to purchasing one.

Is Your Retirement and Income Plan Safe?

To find out whether or not a fixed indexed annuity is right for your specific needs – including growth, protection, and a lifetime stream of income – contact us at Annuity Gator and chat with one of our specialists.

Our primary mission at Annuity Gator is on educating consumers (as well as financial advisors) on how annuities work, and how they may or may not be a good fit, based on specific goals and needs.

So, give us a call at (888) 440-2468 or send us an email with any questions that you may have by going to our secure online contact form. We look forward to assisting you with keeping all that you’ve worked for safe, while at the same time providing you with current and future financial benefits.

How to prepare for your changing risks in retirement

2 Comments
  • Jeff garrison
    6:35 PM, 23 April 2022

    How can these annuity sound so good almost to good to be true?

    • Annuity Gator
      2:12 PM, 26 April 2022

      Hi Jeff– Thank you for your message.
      Our goal is to help people to better understand annuities by providing all of the details – both positive and negative – so as to allow for a more realistic decision going forward. Here at Annuity Gator, our annuity experts discuss the details of any particular annuity with you, and even compare it to other similar annuities. Please feel free to contact us directly, toll-free, at (888) 440-2468 to chat with one of our annuity specialists or visit https://annuitygator.com/contact/
      We look forward to hearing from you.
      Best,
      Annuity Gator

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