Fixed index annuities may offer a hedge against inflation for next-gen retirees
With an FIA, stock market volatility doesn’t have to keep you up at night.
Are you nearing retirement age? Perhaps, you’ve even calculated how much money you’ll need each year to live in retirement. And while there are some solid, time-tested strategies available to help you plan and save for your goals, there are still some unknowns that may weigh heavily on even the best-made retirement approaches.
No one knows, for example, how long they will live in retirement or even how the market will perform during their golden years. Add in other retirement risks like inflation and the potentially expensive, unexpected healthcare costs, and it’s easy to see why even those with a healthy nest egg worry it won’t quite be enough.
Uncertain times call for solid retirement measures
Fortunately, there’s another solution to help fill in the gaps of market-based retirement tools: fixed index annuities (FIAs).
Today’s FIAs offer a range of features and benefits that may help you accumulate assets for retirement, preserve what you’ve accumulated, turn those assets into a guaranteed stream of income, and even help you pass on a financial legacy to your loved ones.
How does an FIA work? Backed by the financial strength and claims-paying ability of the issuing insurance company, an FIA is a contract between you and that issuing company. In exchange for your purchase payment, an FIA can offer protection from market downturns, tax-deferred growth potential and possible credited interest – based on positive changes in an external index. And perhaps most importantly, a guaranteed income stream you can’t outlive.
If you and your financial professional agree, putting a portion of your current retirement nest egg into an FIA can help ensure that this amount will be there for you, providing income to you in your retirement, no matter how long you live or how poorly the stock market performs.
Is an FIA right for you?
An FIA isn’t making trades in the stock market, and it doesn’t require you to follow shares or returns over time. For this reason, some people may enjoy the simplicity of putting in their money and being assured of certain outcomes without having to do extra work.
Even so, FIAs have their own risks and expenses, and you should carefully assess if this type of portfolio option is right for you in partnership with your financial professional. Some loss of control, flexibility and liquidity of assets, however, can be for a limited time. Early payouts may be subject to a surrender surcharge and a market value adjustment. Also, any distributions are subject to income tax for those under 59.5 years of age, and any payouts may incur an additional 10% federal income tax on top of what you’d typically pay in retirement.
Speaking with an Allianz financial professional to discuss your unique financial situation, retirement goals and expected expenses is still the best way to find out if an FIA is appropriate for your retirement portfolio. They can also help you decide how much of your nest egg would work for this type of investment.
More retirees are looking to this retirement approach
You may already have retirement accounts based solely in stocks, bonds or money market accounts, and you don’t have to stop doing what’s been working. In fact, adding an FIA to your portfolio doesn’t require you to abandon traditional retirement models at all.
But, by combining a traditional retirement account with an FIA, there’s less pressure on that traditional account to grow assets quickly to meet your fast-approaching retirement deadline. There’s also the potential to offset at least part of the risk, as an FIA may require a lower overall rate of return than traditional market solutions alone to meet your retirement income needs.
If the market does poorly, you’ll still see the FIA portion of your retirement nest egg protect those hard-earned dollars as intended. This is one less thing to worry about in your overall retirement strategy and is perfect for those hoping to reduce risks as they get closer to drawing retirement income.
And FIA benefits don’t stop at just helping you accumulate for retirement and protecting what you’ve saved. It’s also important to have an income with the opportunity to increase each year in retirement. Generally, this is provided as a built-in or additional cost rider within the FIA. Think about your income in retirement. Will a fixed income be sufficient if expenses rise with inflation?
FIAs aren’t a one-size-fits-all solution, and Allianz offers several FIAs that can meet you right where you are in the retirement planning process.
From additional riders that let you start collecting payments as soon as age 50 to those that can help increase income over time, Allianz offers diverse retirement options designed to address your retirement risks uniquely and with an understanding of how important your nest egg is to you and your family.
Retirement planning? Discover the many options available from Allianz Life by visiting www.LongLiveRetirement.com.