When is the right time to buy an annuity? First, let’s focus on why one might need one. The goal of an annuity is to give you guaranteed income while you are retired. Most annuities are not passed on when you die but some can be specified to be passed on to a spouse or returned to your beneficiaries.
Let’s face it, in the last 20 years, we have had 3 of the greatest stock market crashes ever each with their own unique economic triggers. Each of these crashes are not a big deal when you are young and can wait for the economy to recover but there gets to be a point where you no longer want to endure yet another stock market crash and recovery so you can safely move on to retirement.
By no means should you convert all your 401k’s and IRA’s to annuities. The market (S&P 500) over the last 20 years has crashed 3 times and it has gone from 717 to 1400 back to 527 all the way to 3400. Even this latest round in March we had the S&P 500 down to 2100 and today it is back to 3350. Using equity index funds to grab that movement can be one of the greatest wealth creators. Still in the same moment once you get to be about 50 and the market is on a high why would you not transfer that equity to generate more wealth and become an income provider for you in your retirement years? Unless your equity portfolio has all Dividend Aristocrat stocks (or and Dividend Aristocrat ETF’s) you need additional income choices.
Bonds in this day and age have horrible interest rates, and those interest rates should be better for as volatile bond share are. We will not delve into the monetary policies of the Federal Reserve making bonds (both corporate and treasury) a poor income vehicle at this time. Recently some of the rates of Treasury bonds have gotten close to zero percent. Current eviction moratoriums along with a collapse in retail shopping and office use due to the current economic conditions have made REITs and other real estate investments, less dependable creating good income. Though these types of vehicles should still form some part of your portfolio, having an annuity to take some of the risk off the other financial products can be wise in our current market environment.
If your equity investments have recovered recently due to the recent Congressional and Federal Reserve stimulus, then right now is an excellent time to investigate an SPDA (Single Premium Deferred Annuity). If you are 50 letting it grow in an equity-indexed annuity that takes the positive of market movements but stays flat during market downturns is a great idea. Of course, if you are 60 to 65 and already retired maybe an SPIA (Single Premium Immediate Annuity) and a fixed income annuity that has predictable investment returns with guaranteed minimum rates could be a better tool. Just because the market is on a high and the economic outlook is not good does not mean it cannot turn around. Taking advantage of that high with a Flexible Premium Deferred Annuity can let you transfer your equity saving to an annuity on new market highs in the future.
At Wasatch Smart Finance we are not just here to sell you financial products, we are here to ensure your total financial health. Annuities are not always the most straightforward financial vehicles. Get a professional on your side to help you decide when and how to purchase one. Sit down with us to use our annuity planning software to find the one that fits your goals.
I am a term life, infinity banking concept, indexed universal life insurance, and annuities advisor. I am looking to give Utahans a choice in life insurance as an independent advisor. I represent over 25 different insurance carriers on your behalf so we can find which one will approve you for the best policy. I started this company (Wasatch Smart Finance) so people like you could finally get honest answers & advice from advisors who have a comprehensive knowledge of finance and estate issues. Also as a Veteran, I want to assist other Veterans in their financial journeys.