Protect Your Retirement From Market Downturns
You worked hard to build your savings. Let’s explore how to protect a portion of them from market losses and plan for dependable retirement income.
At Wealth Crafters, the conversation starts with your goals: when you want to retire, what your monthly income needs may be, and how much uncertainty you are comfortable with. Fixed and fixed indexed annuities can provide contractual protection from market declines, with important limits and tradeoffs.
These are insurance contracts designed for long-term retirement needs. Guarantees depend on the issuing insurer’s financial strength and claims-paying ability. Withdrawals, surrender charges, optional benefit fees, and applicable adjustments can reduce your contract value.
Build a Retirement Paycheck You Can Plan Around
Retirement changes the question from “How much can I save?” to “How will my savings support my life?” Housing, groceries, healthcare, and time with family all belong in that conversation.
Start by comparing your expected expenses with income from Social Security, pensions, and other sources. Then consider whether an insurance-based income option could help cover part of the gap.
Depending on the contract and payout option, an annuity can provide income for a set period or for life. Lifetime income may require annuitization or an optional rider with additional costs and conditions. Your income amount, access to funds, and benefits for loved ones depend on the choices you make.
Keep accessible savings for emergencies and near-term needs. A long-term contract should fit into your broader plan, alongside money reserved for flexibility and future growth.
Understand Your Options Before You Decide
Can a 401(k) lose money?
A 401(k) is an employer-sponsored retirement account, not a single investment. Stock and bond funds can decline in value; some plans also offer more conservative choices, such as stable value funds. Your risk depends on what you own.
A fixed annuity is an insurance contract that can protect money from stock-market declines under its terms. Annuities may also be held within retirement accounts. Compare investments, benefits, costs, and access to money rather than assuming every 401(k) or annuity works the same way.
Fixed or fixed indexed: what is the difference?
Fixed annuities earn interest at rates set by the insurer, subject to contractual guarantees. A rate may be guaranteed for a specified period rather than for the life of the contract.
Fixed indexed annuities credit interest using an index-linked formula without investing your money directly in the index. A negative index period can mean zero credited interest rather than a market loss, before fees, withdrawals, and other contract adjustments. Caps, participation rates, and spreads may limit growth.
Not all annuities offer this protection. Variable annuities and registered index-linked annuities can lose money because of market performance.
Understand the tradeoffs
- Access: early withdrawals may incur surrender charges and market value adjustments that reduce principal.
- Purchasing power: limited returns and inflation can affect what your savings will buy.
- Guarantees: backed by the insurer’s claims-paying ability, not FDIC insurance.
- Income features: optional riders may add fees. An income benefit value is not necessarily cash you can withdraw.
- Taxes: withdrawals may be taxable and early distributions may trigger an additional tax. An annuity inside an IRA or 401(k) adds no extra tax deferral.
Should you move money from a 401(k)?
That requires an individual review. Before considering a rollover, compare keeping your current plan with other available choices, including fees, investment options, withdrawal rules, plan benefits, and tax consequences. Moving your entire retirement balance into one product may not fit your needs.
Start with your goals
Bring your questions, retirement timeline, and income priorities. Let’s discuss whether a fixed or fixed indexed annuity deserves a place in your plan. Consider how your choices fit your estate plan and life insurance needs.
Educational information only; not individualized investment, tax, or legal advice. Availability, guarantees, fees, and restrictions vary by insurer and contract. Review the contract and consult your tax professional before making a decision.
Learn more: Investor.gov: Annuities · NAIC: Annuities · FINRA: Retirement Accounts