Safe Ways To Protect Retirement Savings

The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. It can be used to measure the inflation rate, and it is important to understand how it can affect an individual’s retirement income.

According to the LIMRA (Life Insurance and Market Research Association) annuity sales hit a record high in 2020, with sales reaching $236.8 billion, an increase of 14% from 2019. NAFA (National Association for Fixed Annuities) also reported that indexed annuities saw the highest growth rate of all annuity types in 2020.

Annuities are financial products offered by insurance carriers that are designed to provide individuals with a steady stream of income in retirement. These products have become increasingly popular in recent years as people look for ways to secure their financial future and ensure that they have enough money to live on during their golden years.

There are several different types of annuities, including fixed annuities, variable annuities, and indexed annuities. Each type of annuity has its own unique features and benefits, and individuals should carefully consider which type of annuity is right for them before making a decision. It’s important to note that annuities are long-term investments, and it’s essential to consult with an annuity specialist before making a decision.

Fixed annuities provide a guaranteed rate of return on the investment, which is determined at the time of purchase. This type of annuity is considered to be a safe investment, as the rate of return is guaranteed and there is little risk of loss.

Variable annuities, on the other hand, allow individuals to invest in a variety of underlying assets, such as stocks and bonds. The rate of return on a variable annuity is not guaranteed and can fluctuate depending on the performance of the underlying assets. This type of annuity is considered to be a higher-risk investment, as there is the potential for loss.

Indexed annuities are a hybrid of fixed and variable annuities. They provide a guaranteed minimum rate of return and also allow individuals to participate in the gains of a specific stock market index, such as the S&P 500, while also limiting the amount of risk.

In addition to annuities, safe money investments also include traditional savings accounts, CDs (Certificates of Deposit), Treasury bonds and bills, and municipal bonds. These types of investments are considered to be safe because they are backed by the government or a financial institution and have little risk of loss. Savings accounts and CDs are insured by the Federal Deposit Insurance Corporation (FDIC) up to a certain amount. This means that even if the bank or credit union fails, the account holder’s deposits are still protected. Treasury bonds and bills are issued by the U.S. government and are considered to be among the safest investments available. Municipal bonds are issued by state and local governments and are also considered to be relatively safe investments.

When it comes to safe money investments, it’s important to consider the trade-off between safety and return. While these types of investments may be considered safe, they typically offer a lower rate of return compared to more risky investments, such as stocks and real estate. It’s also important to note that safe money investments may not keep pace with inflation. For example, if the inflation rate is 2% and a savings account is earning 1% interest, the purchasing power of the money in the account is actually decreasing. Therefore, it is important to consider the current and potential inflation rate when deciding on safe money investments.

Another important factor to consider when it comes to safe money investments is diversification. Diversifying your investment portfolio can help to reduce risk and maximize returns. This means investing in a variety of different assets, such as stocks, bonds, and real estate, as well as different types of annuities and safe money investments. By diversifying your portfolio, you can help to ensure that you have a steady stream of income in retirement, even if one particular investment doesn’t perform as well as expected.