How to not run out of money in retirement

Patti Fagan, Award-Winning Financial Coach for Women

Contrary to what you may have heard about annuities, they’re not all bad. In fact, the new hybrid ones can be a powerful component to your retirement portfolio.

David Swenson, Chief Investment Officer at Yale University, and the expert interviewed for this article, How to not run out of money in retirement believes it would be a wise move to include an advanced life deferred annuity in your retirement portfolio.

Without knowing exactly which annuity he is referring to – there are a myriad of annuities being offered in the marketplace – I’m going to assume he’s talking about an annuity with a guaranteed lifetime income rider.

Basically, a guaranteed lifetime income annuity is a contract between you and the provider (usually a life insurance company, preferably an A+-rated life insurance company), which guarantees you a certain amount of income (received monthly, quarterly or annually – you choose) in exchange for a certain amount of money (called premium), in either a lump sum (single premium) or over a certain period of time (flexible premium).

The biggest benefit of lifetime income annuities – aside from the fact that they provide safety, so you can’t lose money when the market drops – is that you can elect to receive income for life. In other words, for as long as you’re alive, you’ll receive a check from the insurance company. Even after your account balance goes to zero.

The insurance company is insuring the risk of you outliving your money.

This is HUGE for women who want to safeguard their retirement income.

There are a plethora of other benefits that can be added to the basic annuity contract, such as:

✓ Joint life payout, which continues payment to the second spouse when the first spouse dies

✓Riders for long term care expenses such as nursing home

✓Inflation protection rider

One thing to know is that the more benefits you add to the contract, the more you reduce your overall payout. It’s all a matter of priorities, and what you’re trying to accomplish in your portfolio.

One of the biggest complaints about annuities is their complexity, which causes a lot of confusion in the marketplace, not just for consumers, but for some advisors as well.

That’s why it’s important to do your due diligence and work with an advisor who understands how annuities work.

You can start by checking out this article: How to not run out of money in retirement.

Here’s to your future financial security!

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