Whether you are a young working adult, a parent with young children, someone close to retirement or an investment-savvy person, an annuity or a retirement income plan has an important supplementary role to play in your retirement plan.
Here are 6 reasons why they are so pivotal:
Just like how whole life protection and health insurance serve as the bedrock of your risk management, an annuity forms the foundation of your retirement plan.
1. Principal Protection / Capital Guaranteed:
There is no investment risk. This ensures that your money is safe and does not fluctuate like investments due to volatlity.
2. Guaranteed Income Payouts:
A stream of stable income. You know for sure you will be receiving a fixed guaranteed payout on a regular basis.
Most plans offer some form of flexibility.
4. Potentially Higher Interest:
A huge amount of savings idling in the bank account may not be good news – this is because inflation can erode its value over time. Inflation refers to the cost of goods increasing every year and sometimes you do not see or feel it. For instance, a cup of local coffee cost $1.30 five years ago. Now, you pay $1.90 for that same cup of coffee. That’s a 46% jump!
The returns you get from annuities or retirement income plans are not rocket high. But at least your money is protected and growing at a rate higher than what a bank savings account gives. And along with the non-guaranteed cash bonus, the total returns could potentially hedge against inflation and reward you with more.
Bank accounts give safety and liquidity, but that is all. Investments give potentially higher interest but are subject to market volatility. And if you are managing your own investment portfolio, you need to have both time and resources. Don’t get me wrong – I am not saying you should put all your hard earned money in bank accounts or investments. But striking a balance is crucial. Diversification is key to ensure that risks are spread out in different baskets of assets.
6. Long-term Care Protection:
Payout an additional stream of income for disability during your retirement years. With old age, comes increased financial cost for medical and personal care. Instead of burning your finances on long-term care needs, seek out retirement plans that provide increased income payout upon disability. Insurers may have their own terms such as failing to perform 2 or 3 out of 6 Activities of Daily Living or specific conditions.
A Strong Foundation that provides the ‘Best of Both Worlds’
A retirement income plan or annuity provides safety, surety and stability. It delivers:
Once this foundation is put in place, you can then afford to take a little more risk in growing your money.
Finding The Best Retirement Income Plan:
What you can take up depends on your age and requirements. Retirement planning ought to be approached from a holistic view, where every aspect of a well fortified retirement plan is given due consideration.
Depending on your needs, you may require one or more plans to achieve the desired outcome you have in mind. A retirement plan can be structured using multiple annuities or retirement income plans to cover all your financial needs and objectives upon your retirement. Call me today to secure a retirement income plan that fits your needs!