Investing in Retirement
The typical advice for investors near retirement is to reduce growth investments and increase fixed income (bond) or some type of “Guaranteed” insurance annuity. This advice usually focuses on: What if the Markets Crash. This Fear Based Sales Pitch has sold a lot of bonds and annuities over the years. Since people are retiring earlier and living much longer does it make sense to abandon the potential for growth when you may have 20, 25 or more years in retirement? When investors retire, they don’t cash in all their investments they start taking monthly payments from their retirement accounts. These accounts can be Conservatively Diversified to not only provide current income but also the potential for significant growth over time.
The guarantees offered on Annuities are different with each insurance company so investors should know what is guaranteed and when benefits will be paid. Since annuities are legal contracts that can easily be designed to favor the insurance company it is possible that the guarantee is simply part of a sales pitch and will rarely (or never) be worth anything. Investors considering an annuity should look beyond the “guarantee” and consider how High Initial Commissions or Surrender Charges, Management Fees, Liquidity Restrictions and Historical Returns compare to a diversified portfolio of Liquid, Low-Cost No-Load Funds or ETF’s. Is it a good idea to buy something that may have an Expensive Penalty if you need emergency funds in retirement?