Approaching Retirement: Creating Stability in Your Final Working Years
Welcome to the second installment of our Annuity Awareness Month series, exploring how significant life events influence financial decisions. This week, we focus on one of the most critical financial transitions: the pre-retirement phase.
The 5-10 years leading up to retirement mark an essential planning period. During this time, your financial focus typically shifts from aggressive accumulation toward a balanced strategy that protects your hard-earned savings while looking to maintain reasonable growth.
The Pre-Retirement Shift: Balancing Growth and Protection
As retirement nears, recalibrating your financial strategy can become crucial due to changes in risk tolerance and time horizon. Considerations during this phase include:
- Reduced Recovery Time: Market fluctuations closer to retirement could have a larger impact, as there is less time for your savings to recover.
- Sequence of Returns Risk: Poor investment returns near retirement can significantly influence the longevity of your savings, especially if withdrawals begin during a market downturn.
- Changing Risk Tolerance: Individuals generally shift to a more conservative approach, prioritizing income and wealth preservation over an aggressive growth strategy.
Key Financial Priorities in the Pre-Retirement Phase
During this vital transition, several key financial considerations typically emerge:
- Protecting Accumulated Wealth
Prioritize solutions that offer protection against major losses while still providing opportunities for modest growth. - Creating Income Certainty
Shift focus toward specific strategies for converting savings into reliable retirement income. - Simplifying Financial Management
Consider consolidating accounts to simplify financial management and potentially reduce complexity and stress as life circumstances evolve. - Tax-Efficient Positioning
Work with a tax or financial professional to strategically organize assets to maximize tax efficiency in retirement withdrawals.
Annuity Solutions for the Pre-Retirement Phase
Fixed Index Annuities (FIAs) and Multi-Year Guaranteed Annuities (MYGAs) may help address key pre-retirement concerns by providing:
- Principal Protection: Guarantees against market losses of initial principal.
- Growth Potential: FIAs offer market-linked interest credits, while MYGAs provide guaranteed interest returns.
- Tax-Deferred Growth: These annuities allow for tax-deferred accumulation, which can assist in enhancing accumulation during peak earning years.
- Future Income Options: Flexibility to convert accumulated value into a guaranteed income stream during retirement.
- Simplified Planning: Principal protection can contribute to more predictable income planning by reducing exposure to market volatility.
Strategic Approaches to Pre-Retirement Planning
Consider these practical strategies during pre-retirement planning:
- Retirement Bucket Approach
Segment assets into different “buckets” based on time horizons:- Short-term bucket: Safe, liquid assets for immediate and potential emergency needs.
- Medium-term bucket: Moderate-risk investments for mid-retirement.
- Long-term bucket: Higher-growth potential assets for later retirement.
- Protection with Upside
Utilize products offering downside protection with growth potential, addressing both safety and growth. - Asset Consolidation
Simplify financial management by consolidating various retirement accounts into streamlined solutions. - Income Planning
Begin actively creating retirement income projections and identifying guaranteed income sources to ensure future financial security.
Case Study: The Pre-Retirement Pivot
Consider Michael and Linda, both age 58, planning to retire at 65. After market volatility significantly impacted their savings, they sought a balanced financial strategy for their remaining working years.
They allocated a portion of their assets to a Fixed Index Annuity, providing:
- Principal protection to manage reduced risk tolerance.
- Growth potential via crediting strategies with index-linked returns.
- Tax-deferred accumulation during their final earning years.
- Guaranteed income options to complement pensions and Social Security.
This strategic shift restored their confidence, positioning them securely for retirement.
Taking Action: Next Steps for Pre-Retirees
If you’re approaching retirement, consider these next steps:
- Reevaluate your risk tolerance based on your retirement timeline.
- Review your portfolio for potential vulnerabilities to market volatility.
- Create detailed retirement income projections.
- Explore protection-oriented solutions with growth potential.
- Consult with a financial professional about how annuities could be tailored to your needs and fit within your overall retirement portfolio.
Next week, we’ll discuss managing a financial windfall responsibly, such as an inheritance or asset sale.
Discover the Oceanview Difference
- Financial Strength: Rated “A” (Excellent) by A.M. Best, showcasing our solid financial foundation, providing you with confidence regarding Oceanview’s commitment to meeting obligations.
- Transparency: Clear and straightforward annuity products tailored to your retirement goals.
- Competitive and Flexible: Attractive rates and varied crediting strategies.
- Client-Focused Features: Free withdrawals, nursing home, terminal illness waivers, and full liquidity for beneficiaries upon the annuitant’s death demonstrate our commitment to your financial security and peace of mind.
Disclaimers
Guarantees are based on the financial strength of the issuing carrier. The multi-year guarantee annuity product with form number IIC19 OLA SPDA, or variations of such, are issued by Oceanview Life and Annuity Company (d/b/a Oceanview Life and Annuity Insurance Company in California; NAIC# 68446). May not be available in all states. Not available in the state of New York or Vermont. Policy form numbers and provisions may vary. Rates are guaranteed depending on the guarantee period selected at policy issue.
Guarantees are based on the financial strength of the issuing carrier. The Single Premium Fixed Indexed Annuity Contract [ICC19 OLA FIA], or variations of such are issued by Oceanview Life and Annuity Company (d/b/a Oceanview Life and Annuity Insurancey Company in California). May not be available in all states. Not available in the state of New York or Vermont. Product features, limitations and availability may vary.
HARBOURVIEW ANNUITIES ARE PRODUCTS OF THE INSURANCE INDUSTRY AND NOT GUARANTEED BY ANY BANK NOR INSURED BY THE FDIC OR NCUA/NCUSIF OR ANY OTHER FEDERAL GOVERNMENTAL AGENCY. MAY LOSE VALUE. NO BANK/CREDIT UNION GUARANTEE. NOT A DEPOSIT. MAY ONLY BE OFFERED BY A LICENSED INSURANCE AGENT. GUARANTEES ARE SUBJECT TO THE CLAIM PAYING ABILITY OF THE ISSUING INSURANCE COMPANY.
Annuities are generally designed as long-term retirement solutions and have certain limitations. They are generally not intended to replace emergency funds, serve as income for day-to-day expenses, or support short-term savings goals. Please review the contract for full details.
Annuities issued by Oceanview Life and Annuity Company, 1819 Wazee Street, 2nd Floor, Denver, CO 80202. In California, doing business as Oceanview Life and Annuity Insurance Company www.oceanviewlife.com.
A.M. Best Rating as of December 11, 2024, is subject to change. A (Excellent) rating is third highest of fifteen possible rating classes for financial strength. The outlook assigned to these Credit Ratings is stable.
This material is a general description intended for general public, educational use. Oceanview Life and Annuity Company is not providing investment advice for any individual or in any individual situation, and therefore nothing in this correspondence should be read as such.
Neither Oceanview Life and Annuity Company nor any of its representatives may provide tax or legal advice.
Withdrawals in excess of any Free Partial Withdrawal amounts are subject to a Surrender Charge and Market Value Adjustment (MVA). The MVA may have the effect of increasing or decreasing the Surrender Value of the withdrawal depending on the market interest rate changes.
The IRS may impose a penalty for withdrawals prior to age 59 ½.
Contracts purchased in an IRA or other tax-qualified plan provide no additional tax-deferral benefit, since they are already afforded tax-deferred status. All annuity features, risks, limitations, and costs should be considered prior to purchasing an annuity within a tax-qualified retirement plan. For non-qualified annuities, tax deferral is not available to corporations and certain other entities.
While care was taken in compiling this information, the Company reserves the right to correct any typographical errors that may exist.
Rates, renewal caps, and declared interest rates, will always follow contract provisions relative to minimums and maximums stated. Oceanview determines, at its discretion, the rates, renewal caps and, declared interest rates above the contractual minimums that are guaranteed.
Funds allocated to an index do not directly participate or invest in the stock market or any index.