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The Smart Way to Use Life Insurance for Retirement

Dec 17th 2014 at 1:46 AM

Just as your life has been, your retirement will be nothing like your parents’. Retirement is no longer as simple as filling out social security forms because today people are more active, working and living longer, and income is more reliant on savings. This implies that income should be able to last for the lifetime and to take care of the increasing costs of healthcare, inflation and market uncertainties.

Whilst it may seem overwhelming, it does not need to. A diversified income strategy helps in covering all the bases. The strategy utilizes three forms of income-generating investments: variable annuities, fixed-incomes annuities and an investment portfolio. A mix can be comprised of either of the investments at differing proportions based on one’s incomes and preferences. These components work together in providing streams of income, which can be used in protecting one from effects of market volatility and inflation. First, there is a need to ensure the daily expenses are well covered and that your assets and income can last for the retirement period. Through diversification of income, once can create an effectual retirement strategy, which does not heavily rely on savings in generating after-income tax. Timing is an important consideration when determining an investment mix.

Why diversify income?
To ensure all essential expenses are covered, there is a need to use the guaranteed income from variable annuities and fixed-income annuities, in addition to pension or social security income for protection. After covering key expenses, the investment portfolio will be well positioned for growth and can as well be used for discretionary spending.

Components of a Diversified Investment Strategy

Fixed Income Annuities
This is a contractual agreement entered between you and the insurance agency that guarantees to pay a certain amount of income after a given period in exchange for an upfront investment. The income can start at a future date or immediately depending on the agreement. The strategy is straightforward since fixed annuities together with pensions offer a guaranteed income for meeting essential expenses. The insurance agency will be obliged to make payments at the agreed timeframe and thus secures the future. There will be a need for other assets to address emergency expenses because the invested funds will not be readily accessible. Therefore, fixed annuity should only be a portion of the overall investment strategy.

Variable Annuities
Variable annuities, unlike the fixed annuities, have an investment options that guarantee growth potential, as well as help in offsetting inflation. The option guarantees payments for a lifetime based on the investment's performance. One can pay extra fees for deferred variable annuities that ensure minimum withdrawal of benefits to ensure payment does not go below the agreed amount. Variable annuities help in protecting one from the risk of outliving assets.

Investment portfolios
Investment portfolios with a mix of bonds, stocks and short-to-intermediate-term investments may be a critical part of the diversified income strategies. An investment portfolio ensures flexibility and growth potential, aspects that are extremely vital during retirement. Find helpful insights on smart ways of using life insurance to meet your saving goals through CSA contact for children future is a child support agency.

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