Retirement Planning

One Word Your Financial Advisor Knows to Take Seriously: Guarantee

Learn How You Can Earn Guaranteed Income in Retirement with Annuities

Financial advisors spend years learning the ins and outs of investing so they can offer you the best possible service and results. While this education includes a swath of investment related lingo and terminology, there is one word financial advisors know not to take lightly: guarantee.

Outside of taxes, there are very few guarantees in personal finance, but a 2018 study from Greenwald Research found that, 73 percent of respondents indicated guaranteed income is highly valuable to them. Let's take a look at why advisors may be averse to offering a guarantee and a few places where you may be able to find guaranteed income in retirement.

Why advisors are careful when discussing guarantees

In the world of investments, all decisions come down to balancing risk with returns. There are very few times you can use words like always, never, and guarantee when looking at finances. There are a huge number of variables across the economy that add ambiguity to even the most sound financial strategies.

Considering longer periods of time, the overall trend of the stock market has been upward. But in any short-term period, trends in performance will often be more difficult to identify. Until someone discovers time travel or a working crystal ball, the best anyone can do is work with a trusted advisor to structure a portfolio that addresses risk by factoring in a variety of scenarios. If you are part of the 73 percent that is interested in a guaranteed future income, your financial advisor may have a few options to provide that.

A comfortable lifestyle in retirement

The goal of most retirees is to maintain the same standard of living in retirement that they enjoyed in their working years. To do so requires a combination of managing expenses and building stable sources of income.

Social Security and personal savings aside, annuities are one of the few investment vehicles that can provide guaranteed income. Survey responses showed that those who want guaranteed income in retirement are worried about not being able to afford longterm care expenses (34 percent), the possibility of losing assets in the stock market (33 percent) and outliving retirement savings (30 percent).

Going beyond Social Security, American investors have other options to build a sustainable income in retirement. Those include various types of annuities. For example, an indexed annuity can help you plan for a secure retirement by allowing your money to grow with principal protection. Annuities offer a guaranteed lifetime income after a lump-sum investment or series of investments during the accumulation phase of the annuity. Many also offer guaranteed income by way of an income rider that can be utilized during the accumulation phase. An income rider will likely include specific conditions and carry an additional expense.

Annuities can be a useful investment vehicle for retirees as the planned income can complement Social Security and any other retirement assets to provide a diverse, stable income in the future. When you purchase an annuity, you begin a long-term relationship with the issuing life insurance company. You want to be sure that company has the experience, character and financial strength to serve you now and in the future. You want to be confident that company will back its promises for the long term.

Plan for a more worry-free future

Between longer lifespans, rising healthcare costs and the potential for market volatility, future-focused savers clamor for certainty in an uncertain environment. Annuities may help alleviate some concerns as they can provide a source for guaranteed income for retirement.

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

Annuities are intended as vehicles for long-term retirement planning, which is why withdrawals reduce an annuity's remaining death benefit, contract value, cash surrender value and future earnings. Annuities also may be subject to income tax and, if taken prior to age 59 ½, an additional 10% IRS tax penalty may apply.

An indexed annuity is not an investment in an index, is not a security or stock market investment and does not participate in any stock or equity investments. Annuities are not a deposit, not insured by any federal government agency, carry no bank or credit union guarantee, are not FDIC/NCUA insured and may lose value.

All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

Learning Center articles may describe services and financial products not offered by Protective Life or its subsidiaries. Descriptions of financial products contained in Learning Center articles are not intended to represent those offered by Protective Life or its subsidiaries.

Neither Protective Life nor its representatives offer legal or tax advice. We encourage you to consult with your financial adviser and legal or tax adviser regarding your individual situations before making investment, social security, retirement planning, and tax-related decisions. For information about Protective Life and its products and services, visit www.protective.com.

Companies and organizations linked from Learning Center articles have no affiliation with Protective Life or its subsidiaries.

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