In just a few minutes, you will be well on your way to making a great decision if an annuity is right for you, and if so, which type of annuity to investigate further. We’ll start at the top and move quickly…
In the retirement income world, the primary task is to efficiently convert assets into income, and make that income last as long as it’s needed.
Lasts As Long As It’s Needed….
“As Long As It’s Needed” is by definition is an unknown length of time. It may be your lifespan, and possibly a spouse as well…. This is Longevity Risk, and is a key risk to understand and overcome early on in the process.
Conversely, “as long as it’s needed” may be a more defined period of time. You may have other assets to live on in the future, or may simply be confident with a life expectancy calculation.
Each individual has different needs.
Safe And Efficient
Along the way, we need to “Efficiently” create income, and to do that, you need a solid asset base to work from… You need safety first and foremost, to protect your principal from loss, so that it can support you. But you also can not stay in cash or CD’s and not generate ANY yield. The key is to find something both safe, AND efficient.
Therefore, these are the ground rules for the rest of our conversation.
We’ll come back to each of these main points in the next few pages.
Safe Money Options:
So, in the safe money and fixed income world, the primary options are:
- Bonds (with varying degrees of safety, including credit rating and interest rate risk);
- Cash (with nil to minimal yield and dubious FDIC coverage);
- Annuities (with a giant range of options)
Retirement Income Options:
The most common approaches to retirement income are:
- Systematic portfolio withdrawal (with its associated probability of failure)
- Pensions (rapidly becoming extinct)
- Social Security (click you heels, wiggle you nose, and pray….)
- Annuities (again, a giant range of options)