Using Annuities to Make Your Retirement Funds Last

The conundrum of retirement finances continues to vex those planning for a future with little steady income. If you draw out too small an amount each year, you’ll have lived more frugally than necessary. If you withdraw too much money, then you may exhaust your funds.

Have you considered securing your retirement future using annuities to make your funds last?

Here are a variety of annuity options that will help you extend the life of your retirement funds:

1. Life income option. This annuity option guarantees you income for the rest of your life, regardless of how long you live! In essence, you’re guaranteed to never run out of money as long as the company issuing the annuity is in business.

* Your income depends on your age when you start the payout phase to receive benefits, and how much you invest into the annuity. Talk with your insurance agent to receive a proposal.

* Although you’ll have the peace of mind knowing you’ll never run out of money, keep in mind that if you die soon in the payout phase, the issuing company retains the rest of your funds, per your contract.

2. Life option with a guaranteed term. With this annuity option, it is guaranteed that your benefits will be paid for at least a certain amount of time, such as 10 or 15 years. Your beneficiary will continue to receive funds for the remainder of the term if you should die before the term ends.

3. Single premium immediate option. You purchase this type of annuity with a single premium payment and start the payout phase immediately. In other words, when you retire, you can withdraw part of your savings and purchase an annuity with one large payment.

* What’s interesting about this single premium option is that if you also select the life income option at the time you paid your single premium, you can begin receiving annuity payments immediately which will continue to pay out for the rest of your life!

4. Return of principal guarantee option. This type of annuity guarantees you or your beneficiary the return of your principal. A truly remarkable option, what this means is that regardless of how much money you paid in to your annuity over time, that principal will absolutely be paid out to either you or your beneficiary.

* Again, you can combine this type of annuity with a life income option. Then, if you die before receiving back your entire principal, your beneficiary will be paid the balance of your principal.

5. Joint-life option. This annuity is set up to take into account both you and your spouse’s life expectancies. Thus, the amount you’ll receive will be less than what you receive in the regular life option (see #1). However, if you die, your annuity funds would pass directly to your spouse.

* Some annuity policies even allow for the beneficiary to continue placing money into the annuity, thus building the total amount to provide additional retirement funding later. Thus, these annuity funds will last as long as your beneficiary chooses.

6. Term certain option. This type of annuity enables you to specify the term you want to receive funds. Maybe you want to receive your annuity spread over 15 years or even 30 years. The advantage of selecting a longer period of time or “term” to be paid is that you’re stretching your retirement dollars to last longer.

* Another advantage of term certain annuities is that if you die early in the payment term (let’s say you die the 5th year of a 20 year payout term), your beneficiary will receive the remaining 15 years of payouts.

With some forethought and planning, you can set up an annuity to aid you in stretching your retirement dollars throughout your lifetime.

Is a Hedge Fund the Right Investment Vehicle for You

Do you feel that hedge funds sound just too mysterious and risky? They can also be exciting, since they do offer a chance at high returns. Let’s take a look at what a hedge fund really is and cover the qualifications required to invest in them. Further knowledge about these funds can help you decide if they may be an advantageous investment for you or not.

What Are Hedge Funds?

Hedge funds refer to a type of private, unregistered investment pool that utilizes sophisticated hedging and arbitrage techniques to trade in the financial markets. Not all hedge funds use hedging techniques, though. The term hedge fund really refers to the “private” and “unregistered” status.

Hedge funds are not unlike mutual funds in that they pool the investors’ money and invest it collectively. The differences are significant, though.

What Kinds of Investments Do Hedge Funds Engage In?

Hedge funds are essentially unrestricted in the types of investments they can make. They can engage in arbitrage, take short positions on stocks, invest in different types of derivatives, gold, silver, and more, and can leverage to the hilt.

Essentially, they are unlimited in the amount of risk they can assume. They don’t have the types of limitations on them that are imposed upon a typical mutual fund.

That’s not to say that all hedge funds are extremely risky. Some are, but many are relatively conservative. As with regular mutual funds, there’s a wide variety available.

Given the lack of restrictions, hedge funds have more opportunity to make a lot of money; an annual return of 100% is not unheard of. Many will average 35+% over a reasonable period of time. But those types of returns don’t come without risk and the risk can be considerable.

How Can You Invest In Hedge Funds?

A hedge fund isn’t open to the general public; there’s no place you can simply go and buy shares in a hedge fund. They aren’t allowed to raise money or sell shares publicly. It’s similar to a private club where they use a screening process to decide who to “let in” and you have to prove your worth.

Hedge funds are extremely expensive. Usually, the managers take a substantially larger cut than with other investments, regardless of how profitable the fund is in any given year.

So who can invest in hedge funds? If you’re both wealthy and not risk-adverse, they may be a good option for you. Many funds require a minimum of a $5 million investment, and some require much more than that.

Also, they will likely give you a lengthy questionnaire to fill out to determine if you’re financially sophisticated enough for such high-risk investments. If you meet these requirements, you don’t have to do much other than complete the questionnaire and write a check.

Hedge funds are not for those with a weak stomach and the risks can be considerable. However, the possibility exists to make a lot of money in a short amount of time. This is particularly true for the hedge fund managers.

If you’re qualified to invest in hedge funds, seek out additional information. Your financial advisor can point you in the right direction.