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Dispelling Retirement Myths with Annuities

When planning for retirement, it can be challenging to ascertain the money needed to enjoy your golden years. Because you can’t know the number of years you will live, it can be challenging to determine how much money you need. The closer you get to retiring from the workforce, no doubt you will feel increasing pressure to diversify assets with a multitude of income streams. To ensure a successful retirement, you can turn to tax-deferred investments in the form of annuities. While the annuity marketplace may feel complex, shrouded with misunderstandings and myths, our experts are here to separate fact from fiction and provide the answers you need.

  • Not all annuities feature high fees unless you are looking for more insurance. As an insurance contract, fees are part of the process of annuities. To ensure you will receive a guaranteed income throughout retirement, regardless of your lifespan, it all comes at a cost in the form of fees. However, an annuity can go to great lengths to lower concerns regarding market fluctuations and future changes. The trade-off of fees provides an income guarantee you’d be hard-pressed to find elsewhere.
  • Contrary to popular belief, once you buy an annuity, you are not necessarily tied to it forever. Furthermore, many annuities provide a “surrender period” in which you may withdraw money before the account is converted to an income stream from a balance. Life often happens, including unplanned emergencies and other situations that call for cash. Most annuities will allow individuals to withdraw a maximum of 10% of their account balance, free of charge, throughout the surrender period.
  • Although annuities can often serve as a vehicle for retirement, they aren’t only available for retirees. An annuity works as a supplemental retirement plan well before your 50s. In short, an annuity is there to help diversify your portfolio to provide multiple income sources for use in your retirement or even earlier. Individuals can compound bond income over time without annual tax hits by deferring investment income with an annuity, especially if you already met your 401(k) ‘s tax-deferred account limit.
  • When diversifying a portfolio, no one should be suggesting a large amount of money goes toward an annuity. Only a small percentage should go toward the purchase of an annuity, especially if you plan to use it to pay a particular bill or debt. Because diversification is the key, annuities do not serve to tie your money up in one place but rather balance it into a bigger picture.

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