Americans are falling behind on retirement savings. The Economic Policy Center reports that only 61 percent of families ages 56 to 61 have retirement savings, and that the average value of the savings for that age group is only $163,577. For younger families, the numbers are worse. People are simply not prepared for retirement. To get back on track, the right tools are needed. For many, indexed products are an attractive option.
The Recession
Although many factors are contributing to the current situation, the 2008 recession remains an issue.
During the 2008 recession, many people saw a significant drop in their retirement savings. According to the Employee Benefit Research Institute, 401(k) accounts with more than $200,000 suffered losses that averaged more than 25 percent.
More recent research shows that recovery has been slow.
According to data collected by Gallup, only 40 percent of Americans report a positive view of their current finances and their retirement prospects, indicating that the retirement outlook has not recovered to pre-recession levels. Additionally, 36 percent of Americans expect to rely on Social Security during retirement, compared to only 25 percent of Americans who expected the same in 2004.
To get Americans back on track, a solid strategy is needed. Ideally, this strategy will protect investors from recessions and other stock market woes without eliminating opportunities for higher yields.
Indexed Annuities
To understand the appeal of indexed annuities, it’s important to understand the difference between fixed and variable annuities. Fixed annuities guarantee an agreed upon return. They are low risk. Variable annuities, on the other hand, yield a return that fluctuates with the market. They present a higher risk, but they also offer the chance of a greater return.
An indexed annuity is a combination of both strategies. With an indexed annuity, investors are guaranteed a minimum return regardless of what happens in the economy. At the same time, they have the chance of receiving a higher return if the stock market does well. They are protected during times of recession and loss while also being in a position to take advantage of economic prosperity.
As a result, indexed annuities offer an attractive happy-medium for investors who want to balance risk and reward.
Investors have many options. The best strategy for you will depend on your unique situation, including your age, your current savings and your goals. Our financial planners are here to help you find a retirement program that works for you. Contact us to learn more.
