Retirement Contract — Do You Have a Retirement Contract?
Having a retirement contract should be of utmost importance to anyone desiring to retire at some point in their life. If you plan on working until you die at the workplace, a retirement contract isn’t for you.
What does a retirement contract do for you? Probably the most important answer is a retirement contract is your tool to guaranteed income to meet your retirement needs.
The idea is to have a retirement plan or retirement strategy in place that includes guaranteed income. Creating a retirement contract would be the umbrella tool that fits all the pieces together.
Having a retirement contract shouldn’t sound strange especially when you consider all of the contracts you currently have in place. Start with your employment. You are under contract.
How about that house you live in? It has an insurance policy to cover fire, theft and other damages and hazards. That automobile you drive is covered under a contract with an auto insurance company.
I think you grasp the idea. You are already knee deep in contracts. Adding a retirement contract should not pose a burden.
Several paragraphs ago I mentioned your retirement contract is your tool to guaranteed income to meet your retirement needs. How can you guarantee your income?
The answer is annuities. Stocks, mutual funds, I Savings Bonds, TIPS, and all other forms of investments DO NOT guarantee income. They produce income and produce a bushel basket full but they cannot guarantee income. Only an annuity has that power.
Given that is true, what provisions should you look for in an annuity? Start with a no loss of principal on plan contributions guarantee. An excellent annuity will have this guarantee.
Look at an annuity that produces returns that have the ability to beat inflation and provide a guaranteed minimum income. Not all annuities are created equal in this arena so look at the fine print.
You also want the peace of mind in knowing your annuity will give you an income for life that you and your spouse cannot outlive. You do not want to be 85 and broke. An annuity will not let that happen.
And, if you elect a fixed indexed annuity you want a contract that provides a very high cap rate or no cap rate at all in order to participate in the growth rate of the investment side of the annuity. A higher participation means a higher return.
Be sure your annuity has minimum fees. Generally speaking that means shying away from variable annuities. While the upside with a variable annuity is high so are the fees and costs.
Think of it as if you are an NFL team. You have players under contract but they aren’t performing. You cut them from your roster because their contract allows you to move them off your team and replace them with players who will perform.
Your investment assets should all be under contract. If they aren’t producing acceptable income or have lost their potential to provide an acceptable level of income, cut them. Your retirement contract allows you this privilege.
Your retirement contract also allows you to replace them with investments that will perform. That is how you put an annuity on your team. Your retirement contract not only allows you this power but it beefs up your income team with players that will perform.
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