Build a Firm Foundation
All too often, people forget about the role of fixed annuities in retirement
planning. Too many people seem to believe that the only way to make money is in the stock market, with all of its ups and downs. The following is a summary of an article in a recent KnightLine from the Knights of Columbus. We cannot vouch for its accuracy, but it seems reasonable…
Two 55-year old men have $50,000 to invest for 10 years on January 1, 1999. One decides to put into an S&P Index Fund, paying taxes on dividends as they’re incurred and spending a great deal of time worrying about his investment as the S&P 500 dropped precipitously, rebounded and cratered again. The other, put his money in a fixed annuity, and spent no time at all worrying about the market.
Ten years later, both men are 65 and considering retirement. On 12/31/2008 the man who invested in the S&P 500 would have $43,494. On the same date, the man who chose a fixed annuity yielding an average return of 4.57% would have $78,152. Moreover, he hasn’t yet paid a penny in taxes while his account value was rising.
Should you put all of your retirement money in a fixed annuity? Probably not. Moreover, your return may be more or less, depending on interest rates, than the 4.57% in the above comparison… but it’s guaranteed to be positive!
Why not look into building your retirement on a fixed, firm foundation?