Too often people think that 401 (K) plans to save the final and use retirement. For decades, this was considered the basis for a stable retirement. However, as time changes and markets fluctuate, you would be wise to diversify your strategy. This means a plan that contains several sources of income.
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Experts often recommend that you save at least 10-12 times your salary by retiring, but even those who have thoroughly increased their 401 (K) contributions each year often do not reach this number. Market variability, taxes and inflation can mean a large bite from you 401 (k). That is why financial advisors emphasize that it is important to include other types of investment accounts in your retirement plan.
So what can you do? Financial advisors recommend opening traditional and Roth IRA and exploring health saving accounts (HSA). However, one often overlooked source of pension income financial advisers is increasingly and more an annuity.
Simply put, the annuity is a contract for you and the insurance company that provides guaranteed income when retirement. This often offers higher return potential than a normal savings account or deposit certificate (CD).
Basically, you invest money in an annuity that is raising taxes. When you get 59, you can start getting regular, stable payments from the annuity, although most financial advisors recommend waiting for the end of the 60s or early 70s to start withdrawing.
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If you read the market reports in your throat without worrying about your 401 (K), the annuity can give you peace of mind. Many annuities, including a fixed and fixed index, offer basic protection, which means that your initial investment is guaranteed, even if the market is decreasing. Since you do not invest directly into the stock market, you get a layer of distance and stability.
Experts such as David Blanchett, Ph.d., CFA, CFP, CEO and PGIM DC Solutions Pension Research Manager and American College of Financial Services Professor Michael Finke agrees that annuities can be great in front of unknown.
In the Thinkadvisor article, they wrote: “The annuity can not only reduce the risk of unknown life expectancy, but also allow retirees to spend their savings without discomfort that causes the nest egg becomes lower.”