A key factor to consider when setting up your portfolio for retirement is the sequence-of-returns risk. If you’re forced to sell your investments in a down market to generate income, you will have to take a greater portion of your investments in future years to maintain your income. That, in turn, leaves you with less remaining money invested, reducing the amount you can earn in the future, creating a downward spiral.
There are a variety of ways to structure a private pension that can help reduce the sequence of return risk. This will substantially lower the risk of outliving your money. Remember, similar to other investment products, annuities have fees associated with them, and some types may limit the liquidity of your money. Be sure to consult with a financial professional about how an annuity might work for you. The combinations can seem endless and complex.
The goal when building any retirement portfolio is to figure out exactly how much money you’re going to need to enjoy “retirementhood.” But the inconvenient reality of not knowing how long you’re going to live will make even the most freewheeling spenders a bit more fiscally stringent. So how do you consider a vacation or new Jacuzzi when you have no idea if you’ll have enough money? An annuity can alleviate some of that uncertainty by allowing you to see exactly how much money you’ll have each month so you can spend and enjoy retirement accordingly.
Retirement means something different to each individual, but the common denominator is the desire to minimize the worry and maximize the pursuit of your dreams. Adding an annuity to your retirement portfolio can help you achieve precisely that. Consider sitting down with a financial professional to find out more and see if you have what you’ll need to enjoy retirement.