If you are trying to plan for or pay for retirement by investing in CDs or bonds, you probably agree with this assessment: Good luck! Historically low interest rates on traditional safe harbor investments like CDs and bonds are throwing a wrench in many retirees’ plans to enjoy their retirement.
Not wanting to risk their nest eggs on the roller coaster stock market, retirees want alternatives that give them asset protection and the chance for asset growth during good times. A growing number of them are turning to fixed index annuities, an insurance vehicle that protects principal, provides guaranteed income and offers the opportunity for growth.
Annuities are often chosen because they provide income you can’t outlive. But they are also prized for their wealth transfer feature. If the beneficiary designations in an annuity are correctly established, those funds will pass probate-free to beneficiaries, an especially efficient way to leave a legacy to your loved ones.
There are many kinds of annuities: variable annuities, fixed annuities and fixed index annuities. Each one is intended to answer a particular need. A financial advisor or licensed insurance agent can explain the differences to you and determine which ones meet your goals and objectives.
Questions to Ask
To determine how an annuity can help you achieve your retirement goals, ask these questions:
- Do I need income now or income later?
- Do I need to take income at all, or do I have other goals?
- Is wealth transfer important to me?
- Can I combine income and wealth transfer?
If you already have an annuity, there is a critical question you must ask: Are the beneficiary designations for my current annuity correct? It has been estimated that as many as 80% of beneficiary forms are incorrect. Mistakes could be including a former spouses or not adding a child or grandchild. They all mean the same thing: When you are gone, your money will not go to the people you thought would receive it.
Protect yourself now and your heirs in the future. Meet with a qualified financial advisor or insurance agent who can tailor a retirement plan to fit your needs now and in the future.
John T. Kelly is President of Kelly Financial Services, a financial services firm based in Oak Lawn, IL. John T. Kelly has been in the financial services industry for nearly two decades. During this time, John has helped hundreds of clients in the Chicago and Oak Lawn areas with their estate planning and investment planning needs.