Using annuities as a source of retirement income is a likely to produce strong emotions from retiring dentists and financial advisors alike. Annuities come stocked with choices, and it is not uncommon for a retiree to give up on an annuity as part of their retirement because of this.
Lifestyle, longevity, liquidity and legacy are four common retirement goals, and while an annuities portfolio can be a good choice for some of these, it is not a smart choice for others. Specifically, an annuity is a preferred choice for lifestyle and longevity as it is guaranteed for life. However, you would not want an annuity as a source of income for liquidity or legacy. In the case of liquidity, the money belongs to the insurance company, and with legacy, the money goes when the dentist goes. A better choice for liquidity and legacy lies in a stock-and-bond portfolio option because the money belongs to your children. Contrarily, there is a risk of potential market downturns if you were to choose this for lifestyle and longevity. The choice between these two models is a difficult one. Most investors, dentists included, do not like the idea of giving their savings to an insurance company.
A less obvious option would be to choose a portfolio that includes both annuities and stocks and bonds. Combining aspects of both investment options may be the best strategy for meeting the retiree’s financial goals.
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Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.
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