• Barry Boscoe

Protecting Your Retirement Income with Annuities

By now, you are likely aware that there are 10,000 Baby Boomers daily turning 65. These Baby Boomers are now beginning to seriously think about their retirement and how they will achieve their retirement goals. By now, you are likely aware that there are 10,000 Baby Boomers daily turning 65. These Baby Boomers are now beginning to seriously think about their retirement and how they will achieve their retirement goals. A recent study conducted by Insurance Retirement Institute and Cerulli Associates discovered the following concerns:

  1. 41% of those interviewed consider monthly guaranteed income as one of the most important single traits of their retirement investments, ranking this number one and number two in importance.

  2. Only 25% of Baby Boomers have the confidence that their savings will actually last throughout their retirement.

  3. An astonishing 66% believe that it is extremely important for retirement income to be guaranteed for life, yet only 14% have any plans to purchase an annuity with a portion of their qualified plan money.

  4. The good news is 79% of the Baby Boomers who consult a financial professional have at least $100,000 saved for retirement versus only 48% of those not consulting a financial professional.

These concerns are very real when compared to prior generations which had pensions, they could count on in addition to social security providing them guaranteed income in retirement. It is now the rare exception since pensions have all but disappeared. Social security, which seemed relatively stable, seems to have persistent callings from the government about its solvency or a need for reform. When the word “annuity” is mentioned to most retirees, their interest in a guaranteed monthly income for life seems to diminish. Another study performed in 2018 by Cannex indicated that 73% of the respondents considered a guaranteed income to be extremely valuable to social security, but when the word “annuity” was used, only 32% expressed an interest. The main reason for this is likely that an understanding of the old-style annuity dissuades retirees to consider this option. Commissions and fees associated with the old annuities necessitated stellar market performance year after year in order to gain from them. This has changed! In today’s world, there are many more options available with the new-style annuities. Most have substantially reduced costs or no fees at all. For these reasons, it is now more important than ever to consider the new annuity options to determine how they may fit into your retirement portfolio. Many economists, white papers and investment advisors feel that it is now prudent to have at least 20% of one’s assets in an annuity creating a sound foundation for one’s income needs. More importantly, annuities offer investors peace of mind, guaranteeing their necessary income and allowing them to invest in the market while still maintaining much of their lifestyle. Another factor to consider is the protection against longevity risk. People are living longer and there is a definitive concern that most retirees may outlive their investment portfolios. This is especially true when people are drawing down on their investments to support themselves during a significant downturn in the market. This scenario is called “sequence of returns.” A guaranteed income for life provides the retiree with the stability and security they seek to have in their retirement years. Given that there have been major improvements in the mix of available annuity products along with huge reductions in costs, it may now be worth giving annuities another look.

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