Is an Annuity Right For Me?
Over the course of the last 20 years, we’ve learned one important thing about retirement planning: There’s no magic formula that provides the right answer to every person’s retirement situation. Just like the various types of annuities available, each person’s retirement situation is unique and may require a different approach than other people.
We get the question “Is an annuity right for me?” on a regular basis. The annuity, regardless of the type you choose, is not right for everyone. Purchasing an annuity as a part of your retirement portfolio depends on your specific situation. To help determine if you would benefit from a product like a fixed indexed annuity, it helps to ask yourself a few questions about your retirement.
What Do You Need in Retirement?
In most circumstances, financial advisors will recommend that retirees plan to provide between 70-80% of their pre-retirement income through their retirement. The following four categories will help you determine what you may need to provide a clear pictures of your retirement needs.
- Housing and Utilities – Will your home be paid for by the time you’re ready to retire? Will you be downsizing to a smaller home during retirement? Also, consider the monthly cost of utilities, including your cable TV, electric, garbage and more.
- Food, Clothing & Travel – Like many retiree’s, your dream retirement may include traveling, visiting family and seeing the world. Will you travel early on during retirement or will you spend more time at home? Plan for these possible expenses.
- Transportation – Depending on your current health, your transportation needs may change during retirement. As you age, you may find yourself more dependant on other or outside services to get you from point A to point B.
- Healthcare – As we age, our health slowly begins to dwindle. While the healthcare landscape is changing drastically over the next few years, planning for increasing health care costs are crucial to planning for your retirement expenses and needs.
What Do You Want During Retirement?
When purchasing an annuity, it’s important to include your wants in the decision making process. Determine what the purpose of your retirement savings will ultimately be. Do you want to be able to live your life comfortably with security, or do you want to live in luxury while traveling the world? Will you leave your money to your loved ones or donate to charity?
What’s Stopping You From Reaching Your Retirement Goals?
The last few years have been relatively difficult for most Americans. With government bailouts and an economic stimulus driving up our nation’s debt, we’re starting to see income tax increases, rising interest rates affecting how we borrow money and an incredibly slow economic recovery. Let’s not forget about the slow improvement of the housing market and continuous market volatility.
In addition, rising taxes are a constant concern among retirees that are often difficult to plan for as new regulations change the income tax landscape. The one aspect of retirement that is constant, however, is that most retirees find advantages in tax-deferred retirement products that provide a long-term return on their money.
If you’re like most retirees, you likely lost a portion of your retirement savings in the stock market crash in 2008. Whether you’ve fully recovered or not, it’s important to consider the potential for future downturns. As we get closer to the retirement age, our risk tolerance becomes much lower as we are left with a lot less time to recover from losses. While conditions improve, stock market volatility often makes retirees steer clear of riskier (though potentially better performing) investments to prevent potential losses to retirement savings.
How Do I Determine Which Annuity is Right for Me?
If you find yourself answering these questions with a “Yes,” an annuity may be right for you. That being said, determining the right product for you is completely dependent on your current situation. It’s important to sit down with a professional, who’s experienced in working with annuities to help you determine the right product for you. Contact us today at 225-791-5773 and let us help you find a product that will help you protect your retirement savings.
Want to Learn More About Annuities?
Schedule your free, no obligation consultation today and let us explain the various types of annuities available and what will work best for your specific situation.