Considering how to invest your retirement money can make you crazy. But if you think through the reasons for choosing which type investment (or combination) is best for you, you can recover your sanity. So, let's review the reasons for choosing each of the 3 retirement investments: guaranteed income, safe income, and growth.
-Taking your income from fixed annuity payouts:
When you annuitize your fixed annuity, you get a guaranteed income for the rest of your life. You can also guarantee payments to a surviving spouse or your estate, if you choose to pay extra for that option. Of course once you begin payments, you can't change this investment. So who should choose this?
Reasons for investing in a fixed annuity include:
* You don't have to worry about investing that money anymore.
* You have limited retirement savings, and are worried about how they will last
* You're in good health and expect to live a long life
* Interest rates are very high, so you can get a good monthly income, and
* You're not worried about inflation's effect on your income
* Other people depend on you for income.
-Taking your income from 'safe' income-generating investments:
To provide a fixed income from earnings you can invest in government bonds, and treasury bills and even Guaranteed Investment Certificates (GICs). And you can change your investments whenever you want. And who is this type of investment for?
Reasons for investing in a 'safe' income investment include:
* You've only a few sources of income after you retire so you can't afford to risk much.
* Other people depend on you for income.
* You like having the option of changing your investment in response to interest rate changes.
* Inflation's effect maybe worrisome but maintaining an income is more important
-Relying on growth investments to increase the value of your investment:
You may consider increasing the value of your money to preserve its purchasing power over time. To do so, you'll need to invest in growth stocks or the related growth funds. But with the potential for growth comes a higher risk of losing investment money - at least for a time. Is this for you?
Reasons for investing in growth funds include:
* You already have enough assured income investments from pension or Social Security.
* You worry about future inflation or higher expenses and have additional money to invest to offset their effects.
* You want to leave a legacy to your beneficiaries after your death.
What's also important it to realize that you don't need to confine yourself only to one of these investment types. If you're short on income and savings, but still have many years to live, try to minimize your living expenses. Then buy a fixed annuity to cover those expenses and invest in growth or income investments only for future use. Understanding the choice you make gives you some peace of mind.