The Importance of Preserving Wealth for Retirement

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The 2008-2009 financial crisis was the worst financial crisis since the Great Depression. And it had a tremendous impact on the retirement income landscape of America. In October 2007, the Dow Jones Industrial Average closed at a pre-recession, all-time high of 14,164.43. In March 2009, it had dropped to 6,594.00 – a severe decline of 53.4% in less than 18 months.

Other equity indexes reported similar declines. From December 2007 to December 2008, the Standard & Poor's 500 Index declined 37%, resulting in retirement account losses of $2.8 trillion, or 32% of their value (Mauricio Soto, “How is the Financial Crisis Affecting Retirement Savings?” Fact Sheet, Urban Institute 2008). With the stock market downturn, there was a corresponding impact on Americans' retirement accounts.

Over the years, many Americans have recouped a strong portion of their retirement losses, if not all of them. But as seen in historical data, it's likely new downturns will occur. Afterwards, economic recovery can take years – which is precious time for people approaching retirement or who are already there. From this standpoint, preserving your wealth – or locking in those retirement gains made since the 2008-2009 financial crisis – is essential.

One Basic Guiding Principle for Wealth Preservation
At a basic level, preserving the money you cannot afford to lose – or your “Safe Money” – involves following the Rule of 100. Assuming a lifespan of 100 years, take your age and subtract it from 100. The resultant difference is the ideal proportion of your financial portfolio in investments which have greater risk potential.

Volatile markets such as the stock market can offer great return potential, but they also are subject to greater market risk. It's not a case of “if” the market will correct itself, but rather “when.” Be careful and plan accordingly.

Safe Money Solutions
There are actually retirement vehicles in which you can preserve your existing wealth. These options keep your money safe from the adverse effects of economic downturns, and they do offer some growth potential – though it is limited. This retirement solution is “the right” fixed index annuity.

• Simply put, a fixed index annuity is an annuity which has the ability to earn interest based on a percentage of how an index performs within a period of time
• These annuities are tied to exterior indexes such as the Standard & Poor's 500 Index. In fact, the S&P 500 accounts for over 90% of index choice options
• Nonetheless, the NASDAQ and Dow Jones Industrial Average indexes are other options
• However, the linked index is merely the means by which interest credits are calculated
• Therefore the annuity doesn't participate in the index directly
• No shares of stock, no shares in an index, or dividends are involved

In times of a downward-trending index, your contract principal and interest earnings are kept safe and intact. A fixed index annuity also has a preset maximum rate from which your contract is credited a percentage of the index's yearly change, or whatever time period you chose for crediting purposes. This could be a month, as well, for example.

To learn more about Fixed Index Annuities, visit our “What is a Fixed Index Annuity” blog post.

Fixed Index Annuities Review
Many Americans have been flocking to fixed index annuities as a means for a guaranteed lifetime income in their retirement. According to data from Advantage Compendium Ltd., Americans have purchased roughly $400 billion in fixed index annuities since 1995. And it's a statistic which continues to grow.

When it comes to learning about fixed index annuities and other safe vehicles, many Americans have found answers at Here are some testimonials:

• “ changed my life. They helped me find the trusted advice I needed to build a plan that works for me. They made the entire process very easy and explained everything I needed to know before I made any decisions; I don't worry about running out of income anymore and my kids will get everything that's left. I would highly recommend you contact a Advisor.” – Laurie D. Wilmington, DE

• “We didn’t quite know what annuities were about. We had been to lots of different seminars before, the word would be mentioned, and they would brush over it and go to something else. We find that different advisors financially had their own agenda of what they wanted to do with your money. We want to get out of speculation and into something more conservative and this made sense to me.” – Janice & John R., Warrenton, VA

If you're ready for personal attention with your retirement income and financial goals, can help you. Use our Find a Licensed Advisor section to connect directly with an independent financial professional, and to request a personal strategy session to discuss your needs and goals. And should you have any questions or concerns, call 877.476.9723.

Author: Super User

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