Wait! I have options in my retirement?!? Yes you do and they may be much more than you could have imagined.
In fact, if you had talked to Benjamin Franklin back in the 1700’s he may have advised you to do the same thing he did (more on this later) and it lasted for 200 years before its beneficiaries cashed in on the financial whales which safely grew.
In the realm of retirement funds, on the one extreme, we have the “risk money.” This includes, the variable annuities (high fees & high risk), mutual funds, stocks & bonds, commodities, and alternative investments (such as tangible assets like precious metals, collectibles, certain financial assets, real estate, commodities, private equity, distressed securities, hedge funds, exchange funds, venture capital, film production, financial derivatives, cryptocurrencies).
On the other extreme we have lazy money such as cash, savings, checking accounts, or money market accounts. These are relatively safe, but you will also likely be losing ground to inflation.
Then we have CDs (certificate of deposit accounts), and these are not much better than lazy money; the average CD will give you somewhere around 0.5% to 1.5% growth. Leaving the realm of banks, we have immediate annuities which can create a flow of income, but there are better alternatives than this in the realm of annuities. I personally do not like immediate annuities because you lose control of what you can do in the annuity, and then usually when you die, the money is often all gone.
Fixed annuities are a better alternative for safe money and they can earn you somewhere between 2.5% to 3% or more, depending on the going rates, however, believe it or not, there is yet much better potential out there in the safe money realm than 3%. Fixed annuities are usually best reserved for people in their 80’s who need more liquidity to their finances.
Which option is best for my retirement?
While the safe money options in the previous paragraph are indeed safe, the best option for most safe retirement planning situations is actually the “fixed indexed annuity” (also known as the indexed annuity).
Bankers, brokers, and many financial advisors hate these because people are moving millions upon millions of dollars into fixed indexed annuities, even as you read this.
Fixed insurance companies (these are the insurance companies that offer fixed indexed annuities) are some of the strongest financial institutions in the world, and if you ever find one which has gone bankrupt in the last 100 years, let me know because I have yet to find one. The right fixed indexed annuity will have little to no limiting factors such as caps, spreads, or unreasonable participation rates.
In other words, there are some amazing fixed indexed annuities that are very simple and straightforward, and offer safety, security, and the potential for very healthy growth. I personally think these are wonderful retirement vehicles for people who actually want to retire without the stress and potential for loss when the markets crash. Within these, when the markets go down you will stay completely safe from market loss, but when the markets go up you will be able to participate in the gains.
Many of these annuities offer a bonus when you start your account as well as a minimum growth rate in the income account value even if the stock market is doing nothing. One of the other great highlights, which I believe is a necessity, is that a good fixed indexed annuity will offer you guaranteed income (according to however much you put in the annuity) for the rest of your lifetime (including your spouse, if you are married) and you simply keep collecting the guaranteed income, you will not be able to outlive it.
The trick with these fixed indexed annuities is that the insurance companies are not primarily investing your money into the stock market, or anything of risk for that matter.
They are typically investing in trustworthy corporate bonds and treasuries which they can predict healthy growth over the long term. This is the way they are able to keep you safe when the volatile stock markets drop since fixed insurance companies are not allowed to risk your money in the stock market.
That being said, they use trustworthy indices as measuring tools (a benchmark) by which you can grow your annuity. This is the way you can safely protect your retirement funds and make them last for the rest of your life. How much you put in, however, is completely up to you. Retirement, after all, should be safe and stress free.
