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Annuity
Triple Play
Nearly 25 percent of Americans are concerned about not being able to manage their savings
to last throughout their retirement years, according to a recent study.1
One strategy to help guard against an income shortfall during retirement is by
combining an annuity that offers fixed income with other investments to create a
regular income stream and still build wealth.2
Say an individual retires with a $750,000 portfolio, expects to withdraw $51,000
income annually for an expected 20-year retirement, and would like to leave a
legacy for his heirs. To accomplish these goals, he could follow a strategy like
the one described in the accompanying chart.
Here are some tools he might use to accomplish his goal.
 Immediate
fixed annuity – A fixed annuity is a contract between an
individual and an insurance company. In exchange for the premiums paid, the
company will pay a guaranteed income for a specified period of time in the
future.3 An immediate annuity typically is
funded with a lump-sum payment, and the payout begins immediately.
Conservative investments –
Investments that offer a modest return in exchange for low risk are considered
to be conservative. Examples include individual investment-grade or government
bonds and bond mutual funds that invest in such instruments.
Aggressive investments – Certain
types of stocks and stock mutual funds are considered to be aggressive for their
pursuit of higher returns, and they typically carry more risk. Aggressive
investments should not be utilized unless the investor is tolerant of greater
volatility and willing to leave the money invested for the long term.4
Of course, this approach may not be appropriate for everyone. You may want to
learn more about how an annuity strategy can potentially help you pursue your
retirement goals and add some stability to your financial situation.
1) 2002 Retirement Confidence Survey, Employee Benefit Research Institute
2) Most annuities have surrender charges that are assessed during the early
years of the contract if the contract owner surrenders the annuity. In addition,
if you surrender the contract before age 59½, you may be subject to a 10
percent federal tax penalty.
3) The guarantees of fixed annuity contracts are contingent on the claims-paying
ability of the issuing insurance company.
4) Rates of return will vary over time, particularly for long-term investments.
There are fees and expenses associated with investing in mutual funds, including
portfolio management fees and expenses and sales charges. Mutual funds are sold
by prospectus only. Be sure to read the prospectus carefully before deciding
whether to invest.
© 2002
Emerald Publications
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