Mention the word "annuity," and you might get a scowl, a roll of the eyes or even a sigh of exasperation. I know; I've done it.
That's why I was surprised when 79% of respondents to USAA Life Insurance's 2023 Omnibus survey indicated that guaranteed monthly income is more important than a particular dollar amount. To me, that sounds like an annuity. Apparently, annuities -- or at least the features of an income or immediate annuity -- appeal to a lot of folks.
Pair that response with the fact that nearly half of the respondents were concerned about running out of money, and you have a pretty good rationale for learning more about annuities before you dismiss the idea of incorporating one into your retirement plan.
I know you've heard the phrase, "Don't put all your eggs in one basket." The phrase brings to life the concept of diversification, a basic tenet of investing. However, it's not necessarily a top-of-mind concept in retirement income discussions. It should be. In fact, diversification can be a cornerstone, whether you're building or utilizing your portfolio.
Here are five reasons to consider an annuity as you build and diversify your retirement income strategy:
1. You Probably Already Have One (or More) and Like It
Military retirement, Social Security, and corporate or government pensions are all examples of annuity-like streams of income. If the above-referenced survey is any indicator, people like them. They provide sources of income that you can't outlive.
2. It Allows You to Cover Your Baseline
In an ideal scenario, your guaranteed income would more than cover your core expenses. For most people, their available income streams will not be enough to get that done. That would make exploring additional sources of income a reasonable thing to do.
3. Guaranteed Income Streams Provide Peace of Mind
Safe, stable and reliable income is a beautiful thing. That's especially the case during turbulent times. As I typed those words, it occurred to me that the environment we have experienced in recent years may be driving the survey responses. Times like these highlight the benefits of income streams from Social Security, employer pensions, military retirement and immediate annuities. Monthly income you can count on, and plan around, can make your work easier.
4. The Market Doesn't Matter
Don't get me wrong, I believe that stocks are a key tool to manage the risk presented by inflation. In other words, there is likely a place for them in your retirement plan and portfolio. However, the income provided by an income annuity isn't subject to the woes of the markets.
5. An Income Annuity Can Provide Guardrails
I wonder how many of the 49% of people who responded, "I am worried about running out of money," would attribute that to their own spending habits? The stable monthly income from an annuity could provide some assistance on that front. Granted, it still takes discipline, but the potential is there.
Clearly, USAA Life's survey results indicated that there is some allure to reliable monthly income. So, take the time to explore how your income plan is built. It may be that there's a reason to explore this valuable tool.
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