Using Annuities as an alternative to the 60/40/4 Rule

Not sure what the 60/40/4 rule is? My guess is you probably do know. If you’ve worked with a financial advisor to help you plan for retirement or read any number of financial publications or googled ‘retirement strategies’ then you’ve seen some form of this rule of thumb for a secure stream of retirement income.

Basically, if you have 60% of your retirement funds in stocks, 40% in Bonds and withdraw 4% per year then historically your retirement nest egg should last as long as you do. In the past this strategy has worked well for many retirees but recently some experts have begun to question its viability going forward. The primary reason for this paradigm shift is rates on bonds have hit historic lows and the only place for them to go is up. Quick lesson on the bond market; when rates are dropping, older higher paying bonds become more valuable as new bonds are issued with lower rates. Conversely, when rates are increasing the value of older lower paying bonds become less valuable as new bonds are issued with higher rates. Admittedly this is an oversimplification of the bond market but I think you get my point. No one knows for sure what markets will do in the future. In fact if someone tells you they do know with absolute certainty then I suggest you find the nearest exit and use it!

Please don’t get me wrong on this, there are many talented money managers well equipped to help you manage your retirement portfolio through all types of markets. In fact, I’d be happy to introduce you to one if you’d like. But as the title of this post suggests I’d like to propose an alternative with contractual benefits for the bond portion of your portfolio: using a Fixed Indexed Annuity with an Income Rider. If you’ve done any research on annuities recently you’ve no doubt learned that your principal is 100% protected as well as the interest when credited to the policy. The income rider gives you another level of value, typically a contractual rate of return while you are waiting to retire. In addition, when you decide to turn on the income rider you get a contractual payout rate, a stated percentage of the income account value based on your age; higher payout rates for older ages. The annuity can be designed to provide income for one or more people and may also help offset the effects of inflation. So if you’re looking for a safe alternative to generate lifetime retirement income click on the link below to request more info or to get a quote. Until next time.

John P. Grimes, ChFC

About the author: John founded Nicholas Financial Group in 1997 as an independent planning firm. We strive to help our clients achieve their financial goals by offering prudent advice and easy to understand solutions to their financial problems; consider us a guide through the confusing maze of financial products and services. We specialize in using conservative strategies to grow and protect the assets you've worked so hard to accumulate while reducing risk. We'll also show you how to generate guaranteed lifetime income and efficiently transfer your assets.