Reasonable Rate of Return During Retirement
Strategies for a Reasonable Rate of Return*
One of our guiding principles is to help clients have a long-term reasonable rate of return.* Over time, we believe that you should be able to attain return rates that are reasonable yet keep your principal safe. Of course, when you invest in the stock market there are inherent risks of losing money. Alternatively, certain insurance products, such as a fixed index annuity (FIA) can keep your money safe yet still have a potential indexed interest. Many retirees look to forst protect their savings, then potentially earn a return.
Fixed Index Annuities (FIAs)
FIAs do not invest your money directly into the stock market. Instead, the insurance company issuing the FIA uses an index (such as S&P 500 index, for example) to track potential earnings. If the FIA index rises above a certain level, your account is gets interest credit. The calculation of your rate of return is based upon several factors.
These include, but are not limited to:
- Term length of the annuity
- Additional selected benefits
- Amount of money used to purchase the FIA
- Whether or not you have selected an income rider
- Insurance company terms and conditions of agreement
Realizing a reasonable rate of return* in retirement is possible
Rates of return can feel a little bit like a game. Too low, and you may not have enough income in retirement. Too high, and the risk associated with the rate may be too much. If your money is “safe,” yet the rate of return does not give you enough income, then it won’t work. On the other hand, if you earn enough but your principle is always at risk of loss, that doesn’t work, either. Most retirees need both: a reasonable rate of return* as well as a protection of their hard-earned money.
Could you potentially see a higher rate in retirement? Of course there are no guarantees. Because rates can potentially go up with increased risk, it can be a tricky proposition. Be sure to consider the risks in any financial decisions in retirement. Can your account recover if it has market loss? We believe in looking at the whole picture. Our clients look to protect a portion of their money from loss. In this way, using certain products, you can obtain a reasonable rate of return* over the long term. In addition, you can have the safety of principal. For some people, this is the best of both worlds.
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*Reasonable rate of return over time.