Entries Tagged 'Annuities' ↓

Annuities in Your Portfolio: What You Need to Know

Most investors understand that the basic benefit of fixed annuities is that they offer the potential for a guaranteed payment. Regardless of whether the economy or markets are performing well or poorly, an annuity pays a minimum amount of income every month. But just how much money should you put in an annuity versus other investments?

When it comes to fixed annuity allocation, some financial advisors recommend that you put no more than a third of your assets into annuities. Others recommend that you limit it to three-fourths of your assets. But that’s a big difference.

The reason for the discrepancy is that some financial advisors feel they can get better returns for their clients by investing in a diversified portfolio of securities. But that’s a harder sell today than it used to be, given the huge losses the stock market has experienced in the past few years.

So how much money should you allocate to a fixed annuity? As is the case with any element of a portfolio, fixed annuities are best used in moderation. That’s because they’re a compelling way to guarantee a certain amount of fixed income in retirement. If overdone, however, they can rob a portfolio of flexibility.

No single answer fits every investor, but one guideline is to use an annuity to cover your basic living expenses. You may have to put a significant part of your nest egg into the annuity to receive the amount you need, but you’ll know it will be there, through good times and bad.

Should You Roll Your Retirement Money into an Annuity?

Looking at an annuity? You’re not the only one. Annuities are becoming more popular, according to a new study that looked at how retirees are rolling over retirement plan assets.

When you leave a company or retire, you have the option of rolling over money that’s in your retirement plan, such as a 401(k) plan. But what do you roll it into?

Rollover retirement money is more likely today than it was in 2000 to go into an income arrangement, such as an annuity, according to a new study by Spectrem Group.

In 2000, about 4% of retirement assets that rolled over went into an income strategy. That number is 11% as of 2011. Moreover, of that money in 2011, 30% went into annuities. The rest went into systematic withdrawal plans, structured portfolios or other solutions.

As you may know, an annuity is a contract between an investor and a life insurance company. You give the life insurance company a sum of money, either up front or as a stream of payments, and in exchange the life insurance company guarantees you a stream of payments for a specified time period, sometimes life.

Annuities may appeal to more retirees because they can potentially help protect seniors from the risk of outliving their retirement savings. An annuity can have two potential benefits. It can give retirees an idea how much income they will receive in retirement, and it can help provide a retiree with a measure of protection from investment losses, which are very, very real in today’s volatile markets.

Excellent Resource Regarding Annuities And Retirement


How Annuities Can Help Calm the Market Roller Coaster

The summer of 2011 brought plenty of drama, with the debt-ceiling debate, the downgrade of U.S. debt and concerns about European debt all sending the stock market significantly lower.

It wouldn’t be surprising, given the market mayhem, to hear that financial advisors are juggling calls from worried clients. But many aren’t, because their clients invested in annuities.

An annuity is a contract between an investor and a life insurance company. You make a payment to the life insurance company, either in a lump sum or in a series of transactions, and in exchange the life insurance company offers you an ongoing stream of income at some point in the future.

Because fixed annuities promise guaranteed income payments, in good times and bad, investors who have purchased them don’t have to worry about market volatility.

That’s why sales of annuities have risen significantly in today’s market environment. They were up more than 16% to $60 billion in the first quarter of 2011, according to industry research group Limra. And, sales may rise even more.

In June, the Government Accountability Office, the investigative arm of Congress, suggested that some investors could benefit from buying fixed annuities rather than trying to manage their money themselves.

If you’d like to maintain a certain level of income, then an annuity might be worth consideration. But note that annuities can be complex, meaning it’s a good idea to have the assistance of an advisor when researching options and purchasing one.