{"id":1957,"date":"2012-12-06T16:01:01","date_gmt":"2012-12-06T21:01:01","guid":{"rendered":"http:\/\/www.annuityfyi.com\/blog\/?p=1957"},"modified":"2023-02-14T23:08:16","modified_gmt":"2023-02-14T23:08:16","slug":"using-annuities-stocks-balances-out-your-retirement","status":"publish","type":"post","link":"https:\/\/www.annuityfyi.com\/blog\/2012\/12\/using-annuities-stocks-balances-out-your-retirement\/","title":{"rendered":"Using Annuities & Stocks Balances Out Your Retirement"},"content":{"rendered":"

\"\"I think that pretty much all legitimate financial experts agree that you shouldn’t put all of your financial eggs in the same basket.  Once you have bought an annuity with some of your retirement savings, it allows for more risk with your other money.  In Dorianne Perrucci’s Wall Street Journal article, “You Bought An Annuity. Now What?,” she talks about how having annuities in your portfolio will change the way you invest the rest of your money.  The guarantees that you get from annuity products allow you to take on some more stock market risk.  That risk gives you the potential for great gains in your portfolio.  But even if you don’t get the great gains for which you are hoping, your annuity guarantees will still be there and help meet your expenses in retirement.<\/p>\n

One of New York Life Insurance Company’s VP’s says that having assets which are not correlated is crucial to any investment plan, whether or not you have annuities involved.  Many annuities are not going to fluctuate with the stock market and will also provide you a payment check over the rest of your lifetime.  Annuities are very different from traditional securities, so they are good balances in your retirement portfolio.  A VP at Fidelity Investments says that he thinks investors are actually too conservative in retirement.  Once you have lined up guaranteed income sources to meet your expenses from annuities, Social Security, and pensions; you should get a bit risky with investing.<\/p>\n

Now, just because annuities and higher-risk stock investments are a good combination for some investors, they are not the plan for everyone.  It definitely depends on what type of annuity you own or plan to purchase.  Variable annuities already have ties to the stock market<\/a>, allowing you to take on some risk for more potential gains.  There are investors who are already too heavily invested in stocks who can use annuities to scale back and get more safety from their investments.  You really have to determine your own risk tolerance before making any investment choices.  If taking more risk in the stock market in retirement is going to stress you out and keep you up at night, its not for you, even if it’s what you supposedly should do.<\/p>\n

One of the article’s examples, a couple, had most of their money invested in cash at age 60 and wanted to purchase an annuity to receive a stream of income starting at age 65.  They decided to use 45% of their money to buy two different annuities.  The first was a deferred income annuity purchased with $200,000 that will pay them out $1,057 monthly.  Another 28% of their money was invested in equities because the couple’s families have a history of living a long life.  They know they need the potential to grow their money as well as annuity protection against longevity risk.<\/p>\n

Another investor still had his entire savings invested in equities at age 61.  His financial advisor recommended that he purchase two annuities using half of his savings.  One annuity will start in 2 years and the other in 15 years.  He invested 17% of his money in stocks, so that he still has some exposure and potential for gains, but also so that another stock market crash won’t ruin his financial future.  He has the rest of his money invested in bond funds.  This particular investor has a pension as well, but didn’t think that the death benefits would provide enough for his wife<\/a>.  He likely opted for a death benefit annuity to provide her even further protection.<\/p>\n

Longevity annuities are another option for investors who have reason to believe that they will live a long time.  This could be based on their health or their family history of living long lives.  One financial expert in the article says that these longevity annuities are the best way to protect your income late in life.  You don’t receive payments until you are in your 80s, but the payments are much higher than they would have been if you started receiving them at a younger age.  Some people don’t want to wait that long to get their payouts, which I completely understand.  That, in and of itself, is a risk as well.  Whether you invest in stocks because you have the safety of an annuity or use an annuity to balance the risk of your current stock holdings, the products are a good balance in your retirement portfolio.<\/p>\n

Written by Rachel Summit<\/a><\/p>\n

Follow Rachel, aka Finance Mama, on Twitter https:\/\/twitter.com\/#!\/financemama<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

I think that pretty much all legitimate financial experts agree that you shouldn’t put all of your financial eggs in the same basket.  Once you have bought an annuity with some of your retirement savings, it allows for more risk with your other money.  In … <\/p>\n

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