Planning for flexibility in retirement with fixed indexed annuities
Even the best laid plans can change. Many retirement plans can take a sudden turn — whether someone retires earlier or later than expected, or decides to start working again after retirement. This change in course may have a significant effect on the amount of income needed for the future. For example, many people use annuity income to supplement expected Social Security benefits. But changing the key variable of Social Security income can also shift the role an annuity can play in people's financial lives. The good news is that annuity planning can adapt to shifting variables.
Even the best laid plans can change
An important factor to include in any long-term strategy is flexibility, because life never goes exactly as planned. When we look specifically at retirement, it’s no different. Even if a person has determined his or her expected retirement age, this may fall earlier or later than expected, depending on certain life events. Some workers retire earlier than expected, whether it’s due to personal health reasons, change in marital status, a change in employment or needing to care for a family member. If someone enters retirement earlier than expected, this can have significant consequences, especially if a strategy is not built to meet one’s changing goals.
Filling the gaps with guaranteed income
For some people, finding a way to supplement their retirement income is an important objective, especially if pensions, Social Security and other income sources do not provide enough to help them live the way they want. A fixed indexed annuity (FIA) can help fill in the gaps. When an FIA is part of a retirement plan, this vehicle not only adds financial security and income predictability to a savings strategy, but flexibility as well. If the target date for a person or their spouse changes, shortening or lengthening the time spent in retirement, a financial professional can help restructure the savings strategy to meet that updated goal.
Many FIAs offer guaranteed lifetime income, so no matter how long retirement ends up being, a retiree can rest assured he or she will have income that will last their entire lifetime. On the flip side, if a person enters retirement and doesn’t need income right away, that amount can remain in the annuity and continue to earn interest. Then, this tax-deferred “piggybank” can be accessed later when money is needed to cover retirement expenses.
A way to help fight inflation
Another threat to retirement savings is inflation. Whether it’s everyday items, health care costs, or general cost of living, prices continue to climb. Inflation can be a serious risk — and the longer a person is retired, the greater that impact can be. Some FIAs offer an optional income rider to add more flexibility to a savings plan and help prevent a loss of purchasing power. With payout rates that are indexed to inflation, there’s the opportunity to keep a better pace with the rising costs of goods and services.
Protection from market volatility
It’s also important to know that money in FIAs will never be reduced due to a drop in the market. With market volatility in the headlines and on people’s minds, FIAs can offer people confidence they need to help create a financially secure retirement.
FIAs provide guaranteed income with flexibility
?FIAs can create a regular stream of retirement income that be can’t outlived, provide income for a surviving spouse, cover unforeseen expenses as they age and create a lasting legacy for loved ones. As a way to help mitigate potential retirement risks, as well as changing timelines and markets, FIAs can add much-needed flexibility to a holistic retirement income strategy.