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Investment Options for Building Your Retirement Portfolio

You probably already know the importance of setting money aside for retirement. But with so many investment options available, it can be tricky to determine which mix makes the most sense for your needs and goals.

To make matters even more complicated, there’s no single investment strategy that is ideal for every investor. In fact, even when you’ve decided on a strategy, you may later find that it’s not as well-suited to your needs as you initially thought.

While the best course of action for planning for retirement is to align yourself with a trusted financial professional who can help you sort through your retirement needs and investment choices, it’s good to know what options you have available to you. Here are some retirement investments you may consider:

Retirement Income Funds

A retirement income fund is, as the name implies, a managed investment that has the goal to produce income for use during retirement. Typically, these funds are comprised of a portfolio that features stocks, bonds, and other variable investments, in a similar fashion to a mutual fund, but are available exclusively to individuals of retirement age.

Retirement income funds offer the option of a monthly payout, which is appealing to investors looking to budget for their anticipated retirement income needs. Funds are also available at any time, should the investor require a withdrawal at a certain point.

Investors might consider retirement income funds if they anticipate that they will require a month-to-month income replacement at some point during their retirement years but don’t want to spend time continually keeping tabs on their investments. Of course, there’s no guarantee of a monthly payout from a retirement income fund, which is why it’s important to work with a financial professional who can understand the nuances of your investment fund, even if managing the details isn’t your specialty. There is risk, including possible loss of principal. You will need to make sure that the asset allocation is suitable.

Annuities

Annuities are another popular retirement planning vehicle because they, too, offer the benefit of a monthly payout. Many investors find the option to budget monthly around this type of income a boon to successful retirement planning.

While annuities are insurance products, rather than actual investments in the technical sense, they are often considered part of the investment mix because the benefits they offer can be combined with a robust investment portfolio. There are a few different types of annuities out there and some are more appealing for retirement planning purposes.

A popular choice for retirement is an immediate annuity, which begins paying out as soon as you contribute your initial investment. For investors already enjoying their retirement years, this type of annuity is appealing because the benefits are felt right away.

Another option that some use to fill their retirement portfolio is the variable annuity, which allows you some freedom to customize the annuity mix. While this may seem like an appealing option, it’s important to scrutinize the details of any annuity you consider, in order to avoid incurring unnecessary fees or hidden charges.

Fixed and Variable annuities are suitable for long-term investing, such as retirement investing. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply. Variable annuities are subject to market risk and may lose value.

Bonds

Bonds are somewhat lower-risk investments that offer payout in two ways: first, on monthly interest accrued, and second, on a return of investment at the end of the bond period. These investments are offered by the government and municipalities, so they’re particularly well-backed and should provide the expected payout amount throughout the agreed-upon terms.

When considering bonds as a retirement investment, you may want to consider a “bond ladder” that contains multiple bond investments with varying maturity dates. This way, you’ll earn back investment dollars at different maturity dates throughout the years of your retirement.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price. Bond yields are subject to change. Certain call or special redemption features may exist which could impact yield.

Real Estate Investment Trusts (REITs)

For some, the idea of investing in tangible assets makes sense as part of the retirement investment mix. Real estate investments are a popular choice for investing, and with Real Estate Investment Trusts or REITs, you can have ownership in a basket of properties. Investing in Real Estate Investment Trusts (REITs) involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will be attained.

Managed Funds

Managed funds are another popular choice for retirement investing because they give you the flexibility to pick and choose your investment categories without the day-to-day need to oversee markets and performance. While we mentioned retirement income funds – a type of managed fund – above, it’s important to recognize that there are many other investment options for planning for your retirement.

Depending on your age and asset availability, you may have a variety of managed funds from which to choose when establishing your retirement portfolio. There are a lot of different ways to narrow down which managed fund(s) may work for your situation, but trying to sift through options without missing important details or contrasts can be overwhelming.

As with any type of investing activity, it’s always a good idea to consult your financial advisor when it comes to sorting through your options for managed funds. They have the experience and expertise to give you some ideas of what to look for and what to avoid when comparing and contrasting your investment options.

Are You Ready to Start Your Retirement Planning Journey?

If you’re inspired to start your retirement plans or review an existing retirement portfolio, it’s time to reach out and take that next step. Working with a CFP® professional can give you the boost you need to sort out your retirement goals and establish targets for your future spending needs.

Additionally, working with a professional advisor can provide you with insight to investments that are better-suited to you (or you and your spouse) specifically, depending on your goals, values, and risk tolerance. Your retirement portfolio should be diverse, but not to the point of recklessness. With careful cultivation and portfolio management, you can stay on top of the various components that comprise your unique retirement portfolio.

At Puckett & Sturgill Financial Group, we have plenty of experience in connecting investors with retirement planning tools and investment strategies that are customized to their needs specifically. We would love to meet with you and discuss your retirement needs and answer your questions. Connect today to get started on planning your retirement portfolio!

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.

Municipal bonds are subject to availability and change in price. They are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. Interest income may be subject to the alternative minimum tax. Municipal bonds are federally tax-free but other state and local taxes may apply. If sold prior to maturity, capital gains tax could apply.

What Does the SECURE Act Mean for Annuities and Your 401(k)?

Your retirement plans require review and tweaking from time to time. Sometimes, you need to take a step back and review because of life changes on your end. Other times, outside factors, like changing retirement legislation require your attention.

If you’ve been following the news, you’ve probably heard about the SECURE Act. This is a proposed retirement reform that’s poised to be signed into law and will have an impact on some of your retirement planning activities, should it become law.

While there are a few main areas where the SECURE Act will make a difference in your retirement planning, one big component of this reform is how it’ll impact annuities and 401(k) planning. If you’re curious about how this could change your retirement portfolio or open new investment opportunities, read on to see how you may be able to anticipate the effects of this reform.

Annuities and the 401(k) Mix

Currently, many 401(k) providers don’t add annuities to their plans because annuities are considered a riskier investment and place an unwelcome amount of liability in the provider’s hands. Annuity payouts can fail to materialize, which hurts the investors relying on them as part of their retirement package. Under current laws, plan providers have the fiduciary responsibility to cover the loss of an annuity, which makes them an unpopular part of the 401(k) mix.

Under certain provisions of the SECURE Act, the responsibility for a failed annuity shifts from the retirement plan provider to the insurance company that offers the annuity. With this shift in liability, we may see more annuities pop up in different retirement packages.

What are the Prospective Benefits to Investors?

If you’re looking to add new investments to your retirement portfolio or are investing for the first time, you probably want to know: what’s in it for me?

Annuities can be an option for investors looking for a long-term plan to payout over a certain period of time. Investors who don’t have a whole lot set away in retirement accounts may enjoy the prospect of reliable monthly income, especially if they don’t have other investments that may provide a similar payout.

What are Some Potential Problems to Look For?

As an investor, you want to be aware of the investments that comprise any retirement package that you invest in. If your employer offers annuities as part of your investment options, you should be able to trust that they are worthy of your consideration. However, there is a certain risk that employers will not have the insight to provide annuity options that are particularly beneficial for you as an investor.

There’s also a likelihood that annuities as part of the 401(k) mix will incur extra fees on the investor’s end, as annuity plans tend to come with certain expenses that are often passed onto the consumer. Additionally, as part of the 401(k) mix, annuities may add more limitations to the amount of money you can draw from your retirement account or the age at which you can take these withdrawals.

Have You Reviewed Your Retirement Plan?

An essential factor in choosing your retirement portfolio mix is understanding your options and making decisions that are best suited to meeting your future financial goals. There’s never a bad time to review your existing retirement plan to monitor its performance and change your investment mix, if necessary.

If you’re new to retirement planning and want to learn more about how to invest for your long-term financial planning, contact Jacob Sturgill Financial today for a consultation!

Fixed and Variable annuities are suitable for long-term investing, such as retirement investing. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply. Variable annuities are subject to market risk and may lose value.

6 Ways that the SECURE Act Might Impact Your Retirement Planning

The Setting Every Community Up for Retirement Enhancement Act (SECURE Act) is a major federal retirement reform measure. This bill puts forth a series of revisions to previous laws governing taxes on retirement income, collection ages, and more.

While it’s not law yet, there is a lot of talk about how the SECURE Act impacts retirement planning for the average American. Investors want to know how this is going to make a difference to their portfolios, present and future. After all, there are a lot of ways in which new regulations can change existing plans for better or worse.

There are dozens of measures included in the SECURE Act, some more significant than others. Here are the ones that are most likely to make a difference to your retirement planning activities or existing portfolio.

1. Provides More Opportunities for Small Businesses to Offer Retirement Plans

Under the SECURE Act, there are more opportunities than ever for small businesses to opt into retirement planning for their employees. This bill has provisions to extend previously unreachable 401(k) sharing options for small businesses by allowing multiple small businesses to work together as a larger group and pool contributions into bigger funds. This would, in effect, give employees of small businesses retirement planning options on par with what they would see if they worked for a larger employer, provided that the owner(s) of the small business join a 401(k) pool.

Until now, small businesses have been limited in their ability to provide a variety of retirement planning options for employees, which can impact a small business’s ability to attract and retain talented employees. Options like SIMPLE IRA and SEP IRA, while adequate, don’t have the same luster as 401(k) options. As a result, many small businesses simply don’t offer retirement plans for their employees. Opening 401(k) options for small businesses can provide value for small business owners and confidence for employees at these companies.

2. Removes Age Limitations for IRA Contributions

Another impact that the SECURE Act would have is the removal of age limitations for IRA contributions. Currently, there is an age limit on IRA contribution that limits individuals over age 70.5 from contributing to IRAs. This seemingly discourages retirement savings for individuals who are approaching or past the traditional retirement age.

Removing the age limitation for IRA contributions will encourage continued IRA contribution, even into one’s 70s and beyond. Interestingly, there is already no age limit for contributions to Roth IRA accounts, so this would bring more balance for investors on the fence about IRA conversion.

3. Add Opportunities for Annuities within Retirement Plans

Provisions in the SECURE Act would provide the opportunity for 401(k) plan providers to add annuities to the 401(k) mix, further diversifying investment options for those who invest in these plans. Until now, there has been hesitation on the part of providers to add annuity options, since annuities have presented a certain level of liability when packaged as part of a 401(k) plan. However, the SECURE Act provisions remove this liability from the provider’s side, which may open more options to add annuities to the 401(k) mix.

4. Extends the Required Minimum Distribution Age

By law, you’re required to take a required minimum distribution (RMD) from certain retirement accounts by the time you reach age 70.5. Some investors don’t appreciate the constriction of this requirement, especially if they’re still working at age 70.5 or don’t plan to fully rely on their retirement savings until a later date.

Under the SECURE Act, investors will see the RMD age moved from age 70.5 to age 72. This provides a cushion for investors to add a final push of savings to their retirement accounts. Of course, if you plan on drawing from those accounts earlier than age 72, you’ll still have the option to do so.

5. Provides Penalty-Free Distribution for Certain Withdrawals

Generally, investors shy away from taking pre-retirement withdrawals from their retirement accounts because of the rate at which those withdrawals are taxed. But in some life circumstances, the future nest egg is a valuable tool that could provide some much needed relief in the short-term.

The SECURE Act, in part, seeks to answer the challenge of accessing retirement funds for certain life changes by removing the penalties associated with these withdrawals. Most notably, the SECURE Act has a provision that allows investors to take qualified withdrawals for the birth or adoption of a child. It opens up to $5,000 in penalty-free withdrawals for a qualified birth or adoption within one year of the child’s birth- or adoption-date.

6. Removes Certain Qualifications from Inherited Accounts

Inherited retirement accounts (401(k)s, IRAs, Roth IRAs) have, in the past, provided beneficiaries with the ability to withdraw funds over the course of their lifetimes. However, under provisions in the SECURE Act, these distributions would be limited to a ten year period.

While this doesn’t necessarily make a big impact for smaller inherited accounts, like 401(k)s, since they’re typically liquidated within a short period of time, it does make a difference for investors collecting so-called “stretch” benefits from inherited IRAs. In a technical sense, IRAs are not strictly retirement accounts. The rationale of the SECURE Act’s limitations is to reduce the length of time that beneficiaries can receive penalty-free inherited IRA distributions and infuse a certain amount of tax money back into the economy, by bringing back penalties for distributions taken outside of the designated decade.

So, How Might the SECURE Act Impact Your Retirement Planning

As an investor, you want the confidence that your investments are working hard for you and will one day, hopefully, help you to reach your future financial goals. With a big piece of legislation, such as the SECURE Act, on the table, there are ways in which today’s planning may not be sufficient for reaching tomorrow’s goals.

Instead of trying to work through this on your own, look to your financial advisor for information about how retirement reform might impact your bottom line. Your advisor can help you to sift through new requirements, evaluate your current accounts, and make adjustments that align you with the track you want to take.

If you have any questions about the SECURE Act or want to learn more about your retirement planning options, contact Puckett & Sturgill Financial Group today for a consultation!

Ask Aaron: Are Annuities Bad?

When it comes to researching your investment options, you’ll find a plethora of choices and lots of chatter about what the “best” investment options are. Among this chatter, you’ll no doubt hear the amazing benefits of annuities as investments. You may be thinking: “are annuities a good investment for me?

On the other side of the spectrum, you might have friends or family members who have had poor experiences with investments in annuities and are quick to tell anyone who will listen. Their stories aren’t unique, as sadly there are many investors who have been hurt by overzealous salespeople, disadvantageous contract terms or a lack of understanding of what is one of the most complex investment products available.

So which is it? Are annuities bad? Or are they all they’re cracked up to be?

Let’s take a deeper look…

What is an Annuity?

First things first, let’s look at what an annuity is. An annuity is an agreement between an insurance company and an investor that includes a stream of regular payments. However, all annuities are not created equal, and it’s imperative to make investment decisions with your eyes wide open before you ever sign on the dotted line.

Who Offers Annuities?

Annuities are investment contracts offered by insurance companies. Insurance companies are able to offer certain guarantees that other financial institutions might not be able to offer such as death benefits, income benefits, or crediting benefits, also called riders.

On the outside, this seems like an appealing proposition. But if you come across an agent who seems to pressure clients toward one type of product or company, you might want to steer clear. Someone with a certain product to sell may not have much more in mind than selling as many of those products as possible in order to earn a commission, even though those products may not truly be best for their clients.

Perks of Annuities as an Investment

There are certainly perks to annuities as investments. After all, they’re still a popular investment vehicle for long-term investing.

The biggest perks to investing in annuities are the accompanying tax deferral and other possible guarantees. Many annuities are paid out in consistent, recurring amounts, which is very appealing to individuals looking to set up a consistent stream of income or obtain some type of certainty.

Downsides of Annuities as an Investment

On the flip side, annuities are often not the best investment choice. While they may come with a guaranteed return and other appealing incentives, there are almost always strings attached.

Unseen internal costs or penalties and long surrender schedules can impact your bottom line significantly. Depending upon the specifics of an annuity contract, the payout might not end up as all it’s cracked up to be. And if you’re already committed to an annuity, removing your funds could prove challenging and expensive.

Some Important Things to Remember about Annuities

The most important thing to remember when it comes to annuities is that there is no single financial product that’s best for every investor. For some investors, certain annuities might be an ideal choice. For other investors, those same annuities might be a costly mistake.

And some annuities might be terrible investments, period – even for the most likely candidate. If it sounds too good to be true, it probably is.

Your individual financial situation is an essential driver behind which investments are the best for your portfolio. Instead of a sales pitch, you deserve a personalized recommendation based on an objective review of your specific situation.

At Puckett & Sturgill Financial Group, we take the time to get to know you personally before ever making recommendations for specific financial products. Are you curious about whether annuities are right for you? Reach out and schedule a consultation today!

Disclaimer: Fixed and Variable annuities are suitable for long-term investing, such as retirement investing. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 1⁄2 are subject to a 10% IRS penalty tax and surrender charges may apply. Variable annuities are subject to market risk and may lose value. Riders are additional guarantee options that are available to an annuity or life insurance contract holder. While some riders are part of an existing contract, many others may carry additional fees, charges and restrictions, and the policy holder should review their contract carefully before purchasing. Guarantees are based on the claims paying ability of the issuing insurance company.