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Are fixed rate annuities a good idea for how much of a retirement portfoio?

How much of a $500,000 pre-tax retirement fund be put in a fixed rate annuity?

Nov 18, 2013 by Tom from Dunellen, NJ in  |  Flag
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Good question, and one we advisors struggle with in today's low interest rate environment. First of all, I would suggest you obtain professional advice on this issue, because the right decision is very personal based on your unique circumstances. Health, budget, risk tolerance, and other financial and non financial matters all impact this decision.

For many people, it has traditionally been a prudent move to use a portion of their savings to buy a fixed immediate annuity to create a base of income that they cannot outlive. In particular, if you are very healthy and have a family history of longevity. Unfortunately, low interest rates are currently depressing the monthly income that you can buy with a given amount of money. Some retirees are combatting this by "dollar cost averaging" into multiple fixed annuity contracts. That is to say, they will buy several contracts over a period of years to avoid locking in money at todays rates only to see rates increase dramatically in the future.

There are also some "no load" Variable contracts which tie your monthly payments to the performance of stock indices. Vanguard offers one. Payments can rise or fall, but it may be a way to further diversify your income sources.

Again, this is a very complicated and very personal issue, and I would urge you to seek competent advice from a fee only Certified Financial Planner in your area.

Feel free to give me a call or email if you would like to discuss further. It appears you are located just up the road from my offices.

Comment   |  Flag   |  Nov 18, 2013 from Bridgewater, NJ

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It would depend, I would never recommend putting more then 1/3 of the account in to it, however the best way to determine what makes sense to put in to a product that like, would be to sit down with a planner and put a plan together, that will look at your time frame, goals, income needs, risk tolerance, objectives and after you evaluated it all, then decide how fixed annuity fits in to your portfolio and what is the best dollar amount to allocate in to it. Sincerely Michael, www.VisionaryWealthMgmt.com

Comment   |  Flag   |  Nov 18, 2013 from Farmington, CT

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