Very few investors realize how beneficial an annuity can be in the retirement planning process. An annuity is an agreement for one person or organization to pay another a series or stream of payments, usually representing a contract between an individual investor and an insurance company. Annuities today are an excellent addition to an investment portfolio, allowing clients to take advantage of the greater growth potential in the equity markets

There are several attractive features that can be offered in select annuities including the following:

o  Tax deferral on investment earnings

o  An array of investment options, including “floors” – “floors”

  meaning limitations on the extent of a potential investment decline

o  Lifetime income

o  Benefit to heirs

There are several reasons why one should consider purchasing an annuity. If a particular individual is in the retirement planning stage, a deferred annuity can help you work towards meeting your retirement goals, add diversification to your portfolio, and help one in managing his/her financial portfolio. If a retired individual is in the need income stage of his/her life, an immediate annuity can benefit their particular financial situation by protecting them against outliving their assets, and also by protecting his/her assets from creditors.

A study co-sponsored by the Wharton Financial Institutions Center at the University of Pennsylvania found that because insurers can share the risk of outliving one’s savings across a large group of policyholders, income annuities can offer financial security throughout retirement using 25% to 40% less money then would be required to provide an equivalent level of financial security through a retirement portfolio that does not incorporate income annuities – a benefit that no other financial product can provide.

If you are interested in discovering more information as to how an annuity can help diversify your investment portfolio, please contact us here at Capital Management Group.

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