Best Ways to Build Your Nest Egg
5 Retirement Income Strategies
A well-researched income strategy is essential for a happy and active retirement. However, formulating a plan can be a complicated business when you're trying to balance what's best for your lifestyle and how much risk you're willing to take.
By diversifying your retirement income strategy and putting your money in different investment vehicles you can keep your finances buoyant and ensure that you have the income you need for the rest of your life. Although you may have pension income and Social Security, these are rarely adequate. A comprehensive retirement income strategy will help minimize risks across the board and give you financial independence. Following are some time-tested options to mix and match.
5 Successful Retirement Income Strategies to Discuss with Your Advisor
Total Return Investments
Total return investments are those that balance risk by combining both capital appreciation (growth) and income. By splitting your assets into these two categories, you get a much greater return on your investment. Investing a percentage of your assets into equities such as xxxxx xxxxxxxx, will provide the growth income you need. By putting the remainder of your assets into low risk, income yielding investments such as xxxxxx, you're balancing the unpredictability that comes with growth investments.
Guaranteed investments are very stable and include treasury securities, certificates of deposit, income protected funds and fixed annuities. For the more cautious investor, guaranteed investments are great as a base, but it's prudent to balance these out with higher interest bearing investments to ensure stable finances in retirement.
Variable annuities obtained by way of a contract with an insurance company offer a range of different investment options that offer the potential for growth and give you income payments for the rest of your life. Depending on the performance of the specific investments, the income you get might increase or decrease, although if you pay an extra fee for a GMWB (Guaranteed Minimum Withdrawal Benefit), the payments won't go below the amount set out in your agreement. However, if there is a severe market deficit, your payments could be reduced, even with a GMWB and your account could go to zero .
As 'guaranteed investments', fixed annuities are more stable than variable annuities, as you receive a fixed amount of income. While your income payments won't go down, they won't increase either meaning there isn't any potential for growth, if that's what you're looking for. You'll also lose access to the lump sum of money you used to purchase your annuity, so it's important that you have another pot of money available for you in case of emergencies.
Fixed Indexed Annuities
Becoming widely viewed as the most popular option because of its guarantees, flexibility, and very low fees, fixed indexed annuities can typically provide 20% to 35% more income than variable annuities and the fees are 70% less. Visit with a planner who has extensive knowledge and several years of experience with this particular type of annuity, also known as a private pension.
Take-Away By fully examining the options available to you on your retirement, you can benefit most from a guaranteed income with the potential for growth. The most important thing to remember is not to put all of your eggs in one nest!