Basics of Annuity Combination Investing

Nearly 25 percent of Americans are concerned about not being able to manage their savings to last throughout their retirement years, according to a recent study. There are numerous investment approaches to help make your retirement a financially secure one.

Say you retire with a $750,000 portfolio, expect to withdraw $51,000 income annually for an expected 20-year retirement, and would like to leave a legacy for your heirs.

Basic elements of the Immediate Fixed Annuity

A fixed annuity is a contract between an individual and an insurance company. In exchange for the premiums paid, the company will pay a guaranteed income for a specified period of time in the future. An immediate annuity typically is funded with a lump-sum payment, and the payout begins immediately. Remember, most annuities assess surrender charges during the early years of the contract if the contract owner surrenders the annuity. In addition, if you surrender the contract before age 59½, you may be subject to a 10 percent federal tax penalty. The guarantees of fixed annuity contracts are contingent on the claims-paying ability of the issuing insurance company so ensure that you've researched that company.

Conservative investments - Investments that offer a modest return in exchange for low risk are considered to be conservative. Examples include individual investment-grade or government bonds and bond mutual funds that invest in such instruments.

Aggressive investments - Certain types of stocks and stock mutual funds are considered to be aggressive for their pursuit of higher returns, and they typically carry more risk. Aggressive investments should not be utilized unless the investor is tolerant of greater volatility and willing to leave the money invested for the long term. Rates of return will vary over time, particularly for long-term investments. There are fees and expenses associated with investing in mutual funds, including portfolio management fees and expenses and sales charges. Mutual funds are sold by prospectus only. Be sure to read the prospectus carefully before deciding whether to invest.

Combining Annuities with other investment approaches

One strategy to help guard against an income shortfall during retirement is by combining an annuity that offers fixed income with other investments to create a regular income stream and still build wealth. Of course, this approach may not be appropriate for everyone. You may want to learn more about how an annuity strategy can potentially help you pursue your retirement goals and add some stability to your financial situation.