Yes, A Retirement Portfolio Can Be Too Aggressive

Stocks offer the potential for higher returns but also have greater investment risk, making portfolios susceptible to market downturns. Having a portfolio that is too heavily weighted in aggressive stocks is a concern, especially for anyone nearing retirement. With the start of a new year, it may be a good idea to review your total investments to make sure that they align with your objectives and timeline.

One Option

If you determine that you need to rebalance* your investments, an annuity can be a powerful tool to help stabilize and potentially reduce a retirement portfolio's overall risk. Annuities** offer options and guarantees that make them popular with retirees and investors nearing retirement.

Annuity Advantages

Annuities offer tax-deferred growth, which is a plus for high-net-worth individuals near retirement and who are most likely in their peak earning and tax-paying years. Also, an annuity offers a guaranteed income stream for life! Retirees appreciate knowing that one income source will always be there.

Choices

An annuity isn't a one-size-fits-all solution. You can choose from several types of annuities, which allow you to fine-tune your retirement investments to suit your unique circumstances. Ask your trusted financial professional about requirements, fees, and suitability before deciding.

Fixed annuities come in two different types: fixed immediate annuities, which pay an income right now, and fixed deferred annuities, which accumulate interest tax deferred and pay out income at a later date you choose. They pay a relatively modest annual return, generally slightly higher than the interest on bank CDs. Their contracts guarantee a minimum credited interest and charge fees.**

At the start of 2024, the Federal Reserve Board estimated that 40% or more of individuals born in 1964 and earlier owned more stock than the 47%-67% equity allocation often recommended (depending on age).

Source: Survey of Consumer Finances, December 2023

Variable annuities offer a potentially higher return, accompanied by greater risk. They come in different classes, and the requirements vary. You can decide how the money will be invested, selecting from a menu of investment funds that go into a personal "sub-account." Income payments are based on the performance of those investments.***

Indexed annuities fall somewhere between the fixed and variable choices regarding risk and potential reward. The buyer receives a guaranteed minimum payout, but a portion of the return is tied to the performance of a market index.**

Despite potentially greater earnings, variable and indexed annuities are often criticized for their relative complexity and fees, including steep surrender charges.

A thoughtful retirement investing strategy, whether or not it includes an annuity, can help set the stage for a more financially secure retirement aligned with your unique aspirations.

*Rebalancing a portfolio may create a taxable event if done outside of a retirement account.
** Annuity products are not FDIC-insured; their guarantees are backed solely by the claims-paying ability of the life insurance company issuing them. Earnings distributed from annuities are taxed as ordinary income and, if taken before age 59 1/2, may be subject to an additional 10% tax.
***Read the prospectus and consider the investment objectives before investing. Variable annuities are designed for longterm investing and are subject to investment risk, so when redeemed, they may be worth more or less than the amount invested. Additionally, they are subject to mortality and expense charges, administrative fees, and the expenses associated with the underlying funds.