The volatility of the stock market has been a concern to retirees in recent times. One way to assure yourself a reliable income stream in retirement is through an annuity. Financial advisor Carroll Ramer talks about annuities and what retirees need to know in this report.
Ramer points out that the stock market has been volatile for the last 14 years. “For many baby boomers, this is all they’ve known.” A lot of boomers never got advice to help them allocate their assets and reduce their exposure to swings in the stock market. And as someone’s retirement date nears, there is not much time to get things resolved. For many of these people, protection of their 401(k) principal and a lifetime income stream is what they need. An annuity can provide those things.
Annuities have become more popular, Ramer suggests, because they are capable of producing a higher rate of return than CDs or bonds and because they are insulated from stock market volatility. Annuities can be complicated, Ramer notes, and can have surrender charges that last for a long time. Leaving the annuity early can carry a penalty. “People on Wall Street aren’t used to that type of mentality.” On the other hand, many Wall Street firms have added annuities to their product mix.
Anyone thinking of purchasing an annuity needs to ask some questions: What am I trying to achieve? Do I need income now, later, or not at all? Is my only goal wealth transfer? The best solution is probably to work with an advisor who can help ask the questions and work out an investor’s goals. Once the goals are clear, the right product can be selected. And some retirees don’t really need income but do need to pass on assets to a spouse or children. If the beneficiary designations are done correctly, income may pass without probate. Ramer always recommends a beneficiary review for his clients to be sure that no mistakes are made.
Carroll Ramer is a financial advisor with the Silver Lake Agency in Kasson, Minnesota. Retirement News Today is a featured network of the Sequence Media Group.