Stocks and bonds can be key components of traditional retirement planning, but annuities can also play an important role. Annuities can help grow and protect your retirement savings, but another key feature is guaranteed retirement income.
In a February 2021 article in the Wall Street Journal,1 writer Neal Templin argues that, in today’s low interest rate environment, income annuities, which provide guaranteed retirement income that can last the rest of your life, may provide more spending power in retirement than traditional “bond ladders.”
For many retirees, the time may be right to sell a portion of their bonds and purchase lifetime income annuities.
As Templin explains:
“The current low interest rates make such annuities even more attractive than bonds. While annuity payouts have dropped because of low rates, alternative strategies such as bond ladders—a portfolio of bonds that mature on different dates—have been hit harder.”
For many retirees, Templin continues, the time may be right to sell a portion of their bonds and purchase lifetime income annuities.
“While you’re still working, a diversified portfolio of stocks and bonds is an efficient way to save for retirement. But once you’ve retired and are drawing down that nest egg, income annuities can outperform bonds, some economists’ research shows. The most efficient portfolio for retirees consists of stocks and income annuities, says Wade Pfau, a professor of retirement income at the American College of Financial Services. The annuities provide dependable income, while the stocks provide growth, cover unexpected expenses and help leave a legacy for heirs.”
Read the complete article to learn more, then ask your financial professional if selling bonds and buying income annuities is the right decision for you.
