Investing in an annuity is the best option when you are planning your retirement annuities. It should be part of any healthy investment portfolio. You’ll need to consider how much of your savings you should put into an annuity. The short answer is, it depends. There are a variety of factors to consider when deciding how much of your portfolio to allocate towards annuities. However, there are general guidelines available. You can apply based on circumstances which tend to differ depending on who you are speaking with. And what investment choices you have either it can be in a real estate or contributions to a Roth (IRA) Individual retirement account. Where tax-deductible or you pay tax is done when money is going into your account in result of this all of your future withdrawals are tax-free.
Conventional wisdom suggests withdrawing 4% of your savings in the first year of retirement, plus more to account for inflation. Experts suggest having 25-30% of your portfolio in guaranteed lifetime income, in order to protect yourself against inflation. That means that if you have a retirement savings account worth $100,000, you should consider investing $20,000-$40,000 in an annuity.
When deciding how much of your retirement funds should be in annuities, you need to weigh the pros and cons of each option and also consider what social security benefits you are receiving on your retirement income and how much you’re the cost of living is covered by the investment returns.
Advantages of investing in an annuity:
Many financial advisors recommend investing no more than 25-30% of your retirement savings into an annuity. This will be the best retirement plan as it provides you with a steady stream of income, but will also limit your ability to make withdrawals if you need the money sooner.
Another option is the “4% rule”, which is a guideline that says you can withdraw 4% of your savings the first year of retirement, and then adjust that amount for inflation in subsequent years. This allows you to have a little more flexibility with your money, but it also carries some risk if the market performs poorly.
Also, note that some 401(k) plans allow you to purchase annuities. This is a good option if you want to keep your money in a tax-advantaged account, and it also allows you to shop around for the best rates.
Conclusion:
You’re close to retirement and you’re trying to decide how much of your retirement fund should go into annuities. You’ve done your research and you’re thinking about a fixed indexed annuity, but you’re not sure if you should go all in or if you should hold back a little.
Weigh the pros and cons of each option and make a decision that fits your needs. Speak to a specialist that can understand your finances and financial goals to give you an option that works for you. Ultimately, if you’re comfortable with a lower return but don’t want to worry about market fluctuations, go with a fixed-indexed annuity. If you want the potential for a higher return but are willing to take on more risk, choose a variable annuity.
No matter what option you choose, make sure you fully understand the terms and conditions before signing up. Annuities can be a great way to save for retirement, but they’re not right for everyone, and speaking to an insurance professional is a vital first step. At Skyrocket Tax Service, we provide leading insurance solutions that are personalized to our client’s needs instead of a blanket option that may not necessarily fit their goals or needs. Call us to get a head start on your retirement planning today!
