An Annuity May Restore Your Confidence in Retirement

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Sometimes we forget just how fragile a nest egg can be.

When the economy tanked in 2008, the U.S. markets suffered historic losses. The Dow declined by more than 50%, its biggest drop since the Great Depression of 1929.

Many people lost thousands of dollars — in some cases hundreds of thousands of dollars — that were earmarked for retirement.

Those who were approaching retirement were left with two choices: Either keep working past the age they'd planned to retire or retire with a lifestyle that was substantially downsized from what they once had envisioned.

Under both scenarios, they could struggle to piece back together the plans they once had. But time was not on their side.

Pre-retirement is one of the worst times to experience significant market loss, because there is often little time left for recovery. You need that nest egg you accumulated to generate income when the paychecks stop. If it shrinks, so will the amount of income you'll get.

That's why financial advisors talk so much about volatility and why you should start pulling back from risk as you get older. The markets will always move up and down. And given today's uncertainty — both domestic and worldwide — some loss seems almost unavoidable.

But there are distribution strategies that can help give you an edge in overcoming a loss.

For the average retiree, one way to help distribute retirement income is not by putting hope in the market, but by using an annuity. With an annuity, distribution amounts are, in large part, calculated based on your age and life expectancy; the older you are, the more you get paid.

Now, instead, let's say your friend purchased an immediate annuity with a highly-rated carrier. With a deposit of $209,375, he could generate the $15,000 per year in lifetime income he'd originally planned on. His purchase would be converted into regular payments that would last as long he lives. His annuity would guarantee him a 7.2% return, which could help reduce his fear of running out of money in retirement.^*

Using an annuity to distribute income is a way to overcome market losses — or to avoid them altogether. And it can offer you the confidence to enjoy your well-earned retirement through preservation of the principal and regular income streams.

It is important to remember annuities do have surrender charges, making them a non-liquid asset. Additionally, annuities do have fees and can limit your ability to participate in market gains, even with products such as fixed index annuities. However, some retirees enjoy the comfort of the steady income and the protection benefits offered by annuities.

Most traditional immediate annuities are pretty straightforward once you've made the purchase. But you'll want to work with a financial advisor to secure what's an appropriate product for you, and to review any changes to your goals or financial situation.

Talk to a Financial Advisor

Financial advisors with BECU Investment Services are here to help. Our team will take the time to get to know you, understand your goals and plan and implement a financial strategy that's appropriate for you. Set up a complimentary consultation or call 206-439-5720.