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Help Restore Your Confidence in Retirement
Shared by Strong Valley on June 28, 2022
Restore Your Confidence in Retirement
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Some use the term "nest egg" when talking about a retirement plan but the obvious metaphor of an egg reminds us of the fragility of planning for an uncertain future. An annuity might help with retirement confidence. It’s an actuarial-designed product with distribution amounts, in large part, calculated based on your age and life expectancy. The older you are, the more you get paid. Here are some examples of how annuities work.

Important Disclosure: Content on our website and in our newsletters is for informational purposes only. The information provided may (or may not) directly apply to your situation. We recommend that readers work directly with a professional advisor when making decisions in the context of their specific situation.

Sometimes we forget just how fragile a nest egg can be.

When the economy tanked in 2008, retirees watched in horror as U.S. markets suffered historic losses. The Dow declined by more than 50%, its biggest drop since the Great Depression of 1929.

The oldest Baby Boomers, who were closing in on retirement age just as things were at their worst, watched as their nest eggs cracked wide open and lost thousands of dollars – in some cases hundreds of thousands.

Most were left with two choices: Either keep working past the age they'd planned to retire (Boomers started turning 65 in 2011) or retire with a lifestyle that was substantially downsized from what they once had envisioned.

Under both scenarios, they could struggle to piece back together the plans they once had. But we all know how that goes. Time was not on their side.

Post-Retirement Strategy

Pre-retirement is one of the worst times to experience significant market loss, because there is often little time left for recovery. You need that nest egg you accumulated to generate income when the paychecks stop. If it shrinks, so will the amount of income you'll get.

That's why financial professionals talk so much about volatility and why you should start pulling back from risk as you get older. The markets will always move up and down. And given today's uncertainty -- both domestic and worldwide -- some loss seems almost unavoidable.

But there are distribution strategies that can help give you an edge in overcoming a loss.

For the average retiree, one way to help distribute retirement income is not by putting hope in the market, but by using an actuarial-designed product, such as an annuity. With an annuity, distribution amounts are, in large part, calculated based on your age and life expectancy; the older you are, the more you get paid.

Here’s an Example

Let's say you know a 70-year-old man who had a portfolio worth $500,000. He expected to generate about 3% in retirement income – about $15,000 per year.

But then he suffered through a serious market downturn, and his $500,000 portfolio was reduced to $300,000. At that 3% withdrawal rate, his annual income would decline drastically. In order to replicate the $15,000 per year he planned to pull from his portfolio, he would need to invest aggressively – meaning more risk and a greater chance of losing even more money.

Now, instead, let's say your friend purchased an immediate annuity with an A+ rated carrier. With a deposit of $209,375, he could generate the $15,000 per year in lifetime income he'd originally planned on. His purchase would be converted into regular payments that would last as long he lives. His annuity would guarantee him a 7.2% return, which could help reduce his fear of running out of money in retirement.*

Using an annuity to distribute income is a way to overcome market losses -- or to avoid them altogether. And it can offer you the confidence that you will be able to enjoy your well-earned retirement through protection of the principal and regular income streams.

It is important to remember annuities do have surrender charges, making them a non-liquid asset. Additionally, annuities do have fees and can limit your ability to participate in market gains, even with products such as fixed index annuities. However, some retirees enjoy the comfort of the steady income and the protection benefits offered by annuities.

Most traditional immediate annuities are pretty straightforward once you've made the purchase. But you'll definitely want to work with a financial professional to lock down what's an appropriate product for you, and to review any changes to your goals or financial situation as you age.

Important Disclaimers

*Annuity guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company.

These are hypothetical examples provided for illustrative purposes only; it does not represent a real-life scenario, and should not be construed as advice designed to meet the particular needs of an individual's situation.

It's important for you to talk to your financial advisor to discuss your specific circumstances and goals.

Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results or even estimates of actual returns a client may achieve. This information is designed to provide general information on the subjects covered. Consult your financial professional before making any investment decision. Opinions and estimates offered are subject to change without notice. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. Please see other important disclosures related to

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