We as retirees can feel very overwhelmed thinking about how we can protect the retirement funds we have worked hard for. Learn How To Survive And Thrive The COVID-19 Market Losses.
Which of the following worries you the most?
- Medical and technological advancements have increased longevity among retirees; it is now common for them to live well into their 90s.
- We are concerned we will run out of money as we age.
- There is also the issue of taxes since our country is currently at an estimated $28 trillion deficit, and the middle class is likely to foot the bill.
- One of the biggest concerns for retirees will be long-term care, as 70% of them will require prolonged care when they reach retirement age.
- As health care expenses have skyrocketed, retirees are spending as much as they did before they retired.
Can anything be done? How can we ensure the security of our principal? Can we ensure a lifetime income? Fortunately, yes! This type of investment is called an indexed annuity. It is important to note that I did not say variable annuities since you are still in the market, taking those terrifying rollercoaster rides.
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What Indexed Annuities Are
Stock market indexes can earn a percentage of the gains of index annuities, such as index annuities offering a guaranteed interest rate plus additional interest credits. You can accrue additional interest with index annuities with no risk associated with market fluctuations. There is no loss of principal associated with index annuities due to stock market declines, one of the most appealing features.
The stock market does not directly affect the annuity premiums, so it doesn’t matter how far the market declines. Index annuities are distinguished by their protection from downside losses about variable annuities. When a variable annuity’s value rises, your funds will be used to purchase investments, referred to as “sub-accounts.” This technique can boost a variable annuity’s value when markets rise.
In contrast, your portfolio drops when the market drops.
If the policy has no fees, the investments will never fall below zero, as index annuities have a floor of zero. The investment will never fall below zero if the policy has no fees. As well as sharing in the upside of the market, index annuities also provide access to the market’s ceiling. The percentage may represent the S&P 500 or another index in the market, for example, depending on the insurance company. You take no market risk at all, only the upside outlined in the contract, and you don’t surrender any profits.
Retirement is one of the most frightening times of their lives, especially now that the health care crisis and market volatility are intertwined. Many retirees fear a repeat of the housing or tech bubble crashes of the early 2000s. It would be worthwhile to consult a financial professional who understands fixed indexed annuities and can demonstrate Guaranteed Income, Moderate Gains, and NO Principal Loses.