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Why the Annuity Provides Secure Retirement

 3 min read / 

For the middle class forty something year old retirement is a large financial issue. A traditional 401k or pension may seem like they way to go because it appears to give security to those who possess one. Given that there are variations in the investment strategies for these types of retirement plans, one thing remains fairly constant, your money is loose in the market. Right now this is a great move, overall in the last five years the market has been booming and thus so have peoples retirement income. This is nice for people who are ready to retire soon, but if you have ten to twenty years left in your work life this is giving you a sense of false security. The market corrects, it always does, as you can see this from the graph below (The Futurist). These corrections always happen every ten to fifteen years. While they are not all as drastic as the housing bubble burst of 2008, they still happen. If your money is in the market then it will be partially lost in the next inevitable downturn and it will take three times as longer to return your funds to their original strength let alone account for the time lost where your money could have been growing.

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(Source: The Futurist)

The solution to the problem of market corrections is transferring your financial risk to a multi-billion dollar company via annuities. Given you are starting to think about retirement and have built up a nest-egg that you are not planning on spending, perhaps putting your money into some type of fixed indexed annuity may be more appropriate. This will allow your money to grow with the market because it is usually directly tied to the the Stock Market or the S&P 500. Most companies will take a lump sum investment. Upon this investment you will not be able to touch your money until retirement except for a yearly withdrawal of around ten percent give or take. If and or when the market tanks, your nest-egg will not lose a dime. The company (e.g. Bankers Life, Prudential, etc) will bear the load of the lose. However, this is in return for a small percentage of the earnings that they make you from your money.

Still, your average brokerage will take a larger percentage off the top before they earn you anything, so this is still the lesser of two evils. The real upside of a fix indexed annuity is that you earn money whenever the market is on the rise, and the market never stays down for very long. Not only do you retain any money in your annuity when the market goes down but you earn money from the market being low because it has to rise again. You will not waste the time you would have just returning to your original account balance, in fact you will be gaining funds the whole time that the market is on the rise.

The market is volatile, don’t let good economic times lure you to sleep. Investing in a secure annuity will give you the financial stability you need and will remove the stress of managing your own portfolio.

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