How Investing in Annuities Can Diversify Your Retirement Portfolio

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When it comes to diversifying your portfolio for retirement, there are countless options available — and there are just as many people out there who are in the business of pitching volatile and risky investment choices disguised as secure options. For this reason, it is absolutely essential that you scrutinize each investment opportunity to safely supplement a portfolio that will sustain you throughout your retired years. After doing their research, a growing amount of investors are coming to a common realization: The safest way to guarantee future payments is to purchase a fixed annuity from an authorized bank, broker or a personal independent financial adviser.

A fixed annuity is a contract with an insurance company that guarantees a structured stream of future payments to the purchaser for an upfront principal investment. Choosing this option allows you to turn your liquid assets into a structured payment plan throughout your lifetime. Here is some advice on how investing in annuities can improve and diversify your retirement portfolio.

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Purchasing a fixed annuity from an insurance company

Depending on your risk profile and how far away from retirement you are, purchasing a fixed annuity from an insurance company might benefit you and your family because it can guarantee a stream of structured payments in addition to the other investments that you’ve made. Think of it as a way to supplement any retirement income that you are scheduled to receive in the future.

Generally speaking, fixed annuities are among the safest, least risky assets that an individual can purchase as a way to diversify their retirement portfolio. If you purchase your contract from a strong annuity provider, then you have nothing to worry about. However, unlike savings accounts, annuities are not backed by the FDIC or any federal regulatory agency. In short, if you obtain your annuity contract through a company that goes belly up, you may not be reimbursed your capital or receive your future payments. In order to ensure that you are working with a company with a proven track record, make sure you check their credit rating before you do business with them!

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Investing in secondary markets 

While it is generally safe to follow the investment trends and decisions of successful hedge fund operators, this is one instance where it is a good idea to deviate. Large groups aren’t purchasing annuities because they lack the option to quickly liquefy if an investor needs to pull funds. Once you purchase this new asset from an annuity broker or insurance company, you will only earn your maximum return, typically five percent annually, if you wait it out and accept the payments as they are structured per your contract. Investors will never earn back their capital if they choose to sell early.

As you grow closer to retirement age, it can be tempting to look at high yield investment opportunities as a means to make up slack from delayed investment or savings. It is imperative that you recognize that high-yield comes hand-in-hand with high risk. It is much wiser to look at the most secure options to safely pad your investment portfolio throughout your life.

Walt McGinnis is a finance and digital marketing expert based out of Atlanta, GA. He currently serves as Marketing Director with Fairfield Funding and Web Marketing Coordinator with LumpSum Funder. A University of Georgia graduate, Walt’s areas of expertise include retirement planning, personal finance, marketing trends, and advice on how to sell your structured settlement or annuity. Along with his marketing roles at two companies, Walt is also involved with freelance web development and PPC advertising.

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