Options For Those Looking To Do Something With Their Retirement Savings

You have worked hard all of your life, and you have put away a sizeable chunk of change. Now you are faced with what you should do with this money so that you can get the most out of it through retirement. Naturally, you will want to consult a financial professional to get the best guidance, but if you are interested in getting an idea of just what you can do with it, you have come to the right place.

What Is an Annuity and How It Is Used

An annuity as defined by Investopedia is a “contract between you and a 3^rd party (usually an insurance company) whereby in exchange for making a lump sum payment, the insurance company promises to do these four things: provide an income for a certain period of time, provide for accumulation, or asset growth, provide a death benefit, and provide for long-term care benefits.”

There are two different kinds of annuities—fixed and variable. With fixed annuities, the principal is “fixed” and is guaranteed by the insurance company. With a variable annuity, the principal value will vary depending on the performance of the “sub-account values that your money is allocated to.” As you may be able to surmise, fixed annuities are great for individuals who are more conservative and do not want to tolerate the risk that comes with variable annuities, though the latter has great upside appreciation.

Investing A Chunk into Stocks and Bonds

According to CNN Money, many retirees prefer to invest anywhere 40 to 60 percent of their portfolio in stocks and then put the rest into bonds. Basically, this will allow you to draw from something to replenish your cash reserves as you spend it to pay for your everyday expenses. This will also set you up for long-term capital growth, for having your portfolio invested in stocks and bonds should outpace inflation according to the article, allowing you to weather any price increases on your annuity payments by raising the amount you withdraw from your portfolio.

Diversifying Your Portfolio

One of the key things you can do to diversify your portfolio is to either invest into a mutual fund or create your own virtual fund by investing into a group of companies that you are very familiar with, trust, and may even use in your everyday life. You don’t want to put your investment into one sector of one stock.

Once you have done this, the main thing to remember is to stay up-to-date with the market, how the company is performing, rather than just sending your investment into autopilot. Now, if you think you are savvy enough to handle this on your own, then by all means go for it. It will save you money on fees that firms will charge. But if you are not the trading type and would rather have someone else handle it, make sure you understand what sort of commissions you will be losing money to and any other fees. Determine if what you are getting for paying these fees is worth it.