Chances are your employer offers you an array of benefits, one of them most likely being some version of a retirement plan (SEP, SIMPLE, 401(k), 403(b), etc). Business owners are beginning to put more and more importance on their suite of benefits, because they realize it is a major factor in not only recruiting new employees, but also retaining current ones. There’s also a good chance that the retirement plan they put in place for you has some holes.
This is not the fault of your employer, they can’t possibly design a retirement benefit that fits perfectly for every employee’s situation. That’s what Financial Advisers like GranitPath and Granite Financial Partners are here for. We can evaluate your benefits portfolio, as well as your personal situation and develop a comprehensive solution. Below we’ll review one of the more overlooked aspects of retirement planning.
Plan for Distribution as Well as Accumulation
One of the simpler, yet important, concepts in retirement saving is market participation. Even a conservatively allocated portfolio offers at least some protection against long term inflation. This is a great tool for accumulating assets, but what about when it comes time to retire and start using your portfolio as an income source? The same market volatility that helped you grow your nest egg could also damage it when you begin taking withdrawals. Because of this, some retirees can benefit from guaranteeing a portion of their retirement income. Only about half of Americans retirement plans involve any sort of income solution, and only about 20% of those income solutions are guaranteed. So, this is a key piece that many are missing out on.
Benefits of Guaranteed Income
Among the biggest fears both pre-retirees and retirees face is that of outliving their assets. Guaranteeing a portion of a retiree’s income for the remainder of their life can be an appealing solution for a number of reasons. It is much easier for a pre-retiree to exhale and finally retire when they know at least a portion of their income is guaranteed for as long as they live. Upon retirement, this guarantee can relieve a great deal of stress for not only the individual, but also their portfolio. Having an income source that is not tied to market performance allows an investor to be more flexible with their overall portfolio withdrawals.
Not Your Father’s Pension Income
If guaranteed income for life sounds like a familiar concept, that’s because it is. In the past many Americans would retire after years of hard work and live on the income from their company pension plan. In a time where Pension plans are becoming more and more rare, many individuals are using fixed indexed annuities to accomplish the same goals as a pension. With current interest rates on the rise and many analysts projecting continued rate hikes, we believe annuities can be a great way to supplement bond portfolios going forward.
To further explore these and other options in your work benefits program ask your Human Resources Rep for statements detailing the plan’s offerings, then call us to set up a consultation. We can help you navigate the more complicated parts of you plan to identify specific strengths and weaknesses. From there it may be beneficial to have our team analyze your overall plan.