Making financial goals for the long haul empowers you with control over your future. Realistic ones give you a direction and roadmap and eventually help you build a safety net. Surveys show that 77% of Americans worry about their financial situation. Most of them suffer because they do not have long-term money goals.
You need not be a genius to create an actionable money plan because the basics often suffice. According to a 2022 survey, emergency savings (48%) and investments (36%) are the top financial priorities for Americans. Families with an annual household income of over $100,000 prefer investments (48%) and retirement planning (47%) at a higher rate.
But maximizing high-value investments is the tricky part. Most people build their investment portfolios with stocks, bonds, precious metals, and real estate. Annuities are a good addition for smart investors willing to think outside the box.
Here are a few signs that they make an ideal strategy for your long-term financial goals:
Sign #1: You Want a Guaranteed Income for Life
According to a recent analysis, millions of Americans face the challenging prospect of retirement without savings. Perhaps that’s one reason more and more impending retirees are becoming money-conscious. An annuity can be a savior if you are approaching retirement and seeking guaranteed income during your golden years.
It’s good to have a second opinion when it comes to annuities for those new to the concept. But you can rest assured that they can open an income stream that lasts for a lifetime, no matter how long you live. They provide a safety net even if you outlive your other retirement savings.
According to Annuity Straight Talk, you must understand the contract and ensure it aligns with your goals. Proper understanding can change your opinions and perspective on annuities.
Sign #2: You Seek Tax Savings or Deferral
Taxes can be a major hindrance to your financial goals because they can reduce your income and investment value. They can even affect your traditional IRA or 401k savings. An annuity can lower your tax burden in retirement as the money invested in it grows tax-deferred.
You only pay taxes once you start withdrawing the money from the annuity. It means you can defer taxes on investment earnings, even as the investment grows over time. The best part is that the money is taxed as ordinary income. You can even receive tax-free income for life by adding a lifetime income rider to a Roth annuity.
Sign #3: You Want to Build Defenses Against Inflation
Inflation is a persistent problem in the US despite its prosperity. Statistics were dismal in 2023, with inflation increasing 3.2% in July from a year ago. Not surprisingly, many Americans consider building defenses against inflation as one of their primary financial goals. Annuities can help you keep pace with inflation in the long run.
Integrating annuity into your portfolio can help you get cost-of-living adjustments (COLAs) to increase your payments year on year. With this annual growth, you can easily combat inflation, even as a retiree. You don’t have to worry about covering your basic living expenses.
Sign #4: You Want to Avoid Probate
Probate is the process of administration of a deceased person’s estate or will to their designated beneficiaries. While your financial investments, bank accounts, and real estate pass down to your children and grandchildren, probate can cost time and money. Your beneficiaries can get immediate access to the money.
Annuities do not go through probates, making them an ideal investment if you want your heirs to inherit your assets without hassles. All you have to do is ensure that your annuities have a death benefit. Also, designate a beneficiary to receive a guaranteed minimum or the remaining money.
Sign #5: You Expect Safe Growth
Another sign to opt for annuities as a part of your long-term financial goals is when you expect safe growth with minimal risk. Fixed annuities pay a fixed rate, usually higher than the bank rate. Conversely, indexed annuities pay a return indexed to different markets, such as stocks, bonds, or gold.
Either way, your annuity value cannot decrease due to market losses. You get added peace of mind about the safety of your investment, regardless of the market risks and economic changes. Your money grows better than in real estate, bank accounts, stocks, and precious metals.
Summing Up
Annuities make a wise investment for portfolio diversification whether you are close to retirement or still have many years to go. Nobody knows where the market is headed next, but annuities can help you safeguard yourself from risks and reach your financial goals effectively. They also ensure safety, growth, and tax savings in the long run.
