How annuities can help you diversify your strategy

You’ve worked hard and have plans for retirement, but will your savings last your entire life?

Today’s future retirees are looking for ways to support the traditional sources of guaranteed income, such as Social Security benefits or pensions. Investing in an annuity can help diversify your assets and keep you from running out of money in retirement, allowing you to maintain your lifestyle and protect the ones you’re responsible for.

Americans today are living longer than ever before1, making it necessary to financially plan for upwards of 30 years of retirement. In addition, there are several factors that can have a negative impact on your financial security as you grow older. Having a diversified plan is an important step in reducing those risks.

Protect with an annuity

An annuity is an investment product that provides you with a steady stream of income over a set number of years or for the rest of your life. They are useful in diversification because they can provide protection against certain economic factors, including:

  • Market Volatility: Changes in the market will inevitably impact any invested savings. A fixed annuity offers continuous payments that aren’t affected by sudden downswings, so you receive the same income each month regardless of how the market is performing.
  • Inflation: Even if your savings are secure, the depreciation of purchasing power causes every dollar to count for less and less as time goes by. In fact, at the current rate, purchasing power will be cut by about half in 30 years.2 With an annuity, you can buy a supplementary rider that accounts for inflation, increasing your payments to keep pace with rising cost-of-living expenses.
  • Healthcare Costs: Healthcare is one of the largest expenses that retirees have to face, and about one out of every two Americans who are 65 years old today will have to pay for some type of long-term care in their lifetime.3 The guaranteed income from an annuity can help offset the cost of out-of-pocket healthcare expenses, allowing your retirement quality-of-life to continue as planned.
  • Taxes: Tax liability can take a sizable portion of your savings, but a deferred annuity allows your assets to grow over a period of time with limited tax exposure. Annuities also offer a tax advantage by allowing you to strategically time your withdrawals in a way that helps reduce tax impact.

In general, a diversified portfolio will be better protected against financial risks and unexpected expenses than a non-diversified portfolio. When you diversify with an annuity, you’ll have the comfort of knowing there’s a steady, guaranteed source of income throughout your retirement.

At Lincoln Financial, we want to help you get to and through retirement. Talk with your financial advisor to find an annuity that will fit your family’s changing needs.

You may also like
  • LIFETIME INCOME

    Have you considered lifetime income?
    Learn more.

  • LIFETIME INCOME

    Balance, protect and grow your retirement income

    Discover how.

Diversifying does not guarantee growth or protect against loss. Variable annuities are subject to investment risk including loss of principal.

1Retirement & Survivors Benefits: Life Expectancy Calculator. Social Security Administration. April 11, 2017. https://www.ssa.gov/oact/population/longevity.html

2Inflation Calculator. SmartAsset. 2018 https://smartasset.com/investing/inflation-calculator

3Favreault, Melissa. Dey, Judith. U.S. Department of Health & Human Services. Long-Term Services and Supports for Older Americans: Risks and Financing Research Brief. Washington DC: U.S. Department of Health & Human Services, Office of the Assistant Secretary for Planning and Evaluation, Office of Disability, Aging and Long-Term Care Policy. Revised February 2016. https://aspe.hhs.gov/basic-report/long-term-services-and-supports-older-americans-risks-and-financing-research-brief