What Do We Really Want from an Annuity?

At Lord and Richards, we help people just like you retire financially independent or "job optional." Accomplishing such a task is more challenging than simply setting aside money for the future. Once you begin living on your money, you enter a danger zone where you could fall prey to disruptions. Having to return to work after you've quit your job due to avoidable mistakes is the worst-case scenario. During our Financial Independence Review?, we provide a 360-degree view of your financial plan's likelihood of success. Financial success in retirement is having the freedom to do what you love with the people you love without the risk of having to return to work. We want you to be able to retire when you want, with your desired budget.

Our last article introduced immediate, fixed, and variable annuities. Annuities are often discouraged by advisors or firms that do not offer them as part of their services, especially if they are pushing other services they specialize in. A fiduciary must legally act out of the client's best interest; they look out on the field and consider a broad array of tools when constructing your fiscal house. If you're working with someone who's ruling out entire categories of investments simply because they don't offer them, you may want to take your business elsewhere.?

At Lord and Richards, our first step is to evaluate the level of risk you're comfortable taking. Many people are aware of the troubling, volatile times with wars and uncertainty in the market and politics and want to reduce their risk. Let's review the types of annuities we discussed in our last article.

Immediate Annuities?

Immediate annuities have been used for ages to create pensions, such as Social Security or the pension you receive from your employer or the government.?

Fixed Annuities

In a fixed annuity, money is saved and protected with generally no losses or fees. They're low cost, and money grows at a fixed, guaranteed rate, like a certificate of deposit, their direct competitors. A pre-defined period must be established; the longer the period, the higher the growth. During this time, however, you have less liquidity. Once the time has expired, you can access your money and use it however you'd like.?

Variable Annuities

Variable annuities involve the most risk with your portfolio; you can lose money, and it is expensive to add features that protect your future income or death benefit when it's time to withdraw money.?

The compromise with any annuity is that they are long-term investments unsuitable for an emergency fund. As part of your Financial Independence Review? at Lord and Richards, we help you establish a liquid reserve that will be more than enough to prepare you for any challenges that may arise.?

You must use long-term investments that offer safety and principal protection to have a properly funded long-term retirement future. What if you could have the steady, reliable income guarantees of an immediate annuity, the principal protection and lack of fees from a fixed annuity, and the growth opportunity of a variable annuity without the fees and losses from your portfolio? Years ago, someone created a hybrid solution called a fixed index annuity. While this type of annuity has also received criticism from the same audience, we consider every possible tool that could help build your fiscal house.

Most of my retired clients want to avoid the risk and high fees of a variable annuity, the complete loss of control of an immediate annuity, and the low growth typical of a fixed annuity. They are usually willing to compromise some of their liquidity to protect their principal and exchange the low, guaranteed rate of a fixed annuity for the opportunity to get more.?

I've previously discussed the concept of "elevator up, never down." When your fixed-indexed annuity credits interest, it's tied to a market index of a fixed rate. When the index that your annuity is linked to increases, you receive a credit or positive returns. When the index decreases, you receive zero because we never risk your principal. While this may seem complicated, imagine that the low, guaranteed interest on a fixed annuity is all you have, and you take it to Vegas and gamble it. If you're conservative with your principal, you can be more aggressive with the interest. You may risk receiving zero interest, but you will never experience negative returns. When you're willing to take those steps, you can begin participating in the market without risking the principal: "elevator up, never down."?

Most people have been exposed to this concept when it comes to annuities and other misunderstood financial tools. We have an excellent team of financial professionals and fiduciaries at Lord and Richards who come alongside you to make decisions in your best interest. We help you develop a plan so you can retire financially independent. That plan may include principal-protected tools like fixed or fixed-indexed annuities that reduce your risk and "fear factor" of retirement and provide greater certainty and guaranteed income. These features aren't guaranteed with dividend stock, mutual funds, or exchange-traded funds, as those are all based on performance. A Fixed Annuity allows you to begin withdrawing money at your chosen date – perhaps at retirement – and never run out for the remainder of your and your spouse's life. We'd be delighted to introduce this exciting tool to you; it begins with a simple phone call.?