Building a solid income plan is a foundational piece of retirement planning and there are a variety of ways to create those income streams. One product that often comes up during meetings is the annuity because of its ability to produce guaranteed income to replace your paycheck, but is it a good choice for your portfolio?

Jake Doser, CFP®, CPWA® and Nicholas J. Colantuono, CFP® join the Money Wisdom podcast to dive into a question we received: ​a ​friend ​told ​me ​that ​I ​should ​think ​about ​an ​annuity ​for ​retirement ​income. ​What ​do ​I ​need ​to ​watch ​out ​for ​with ​these ​products ​while ​I’m ​shopping ​around? If you’re considering annuities as part of your retirement strategy, this episode is worth watching.

Annuities are a popular choice for those looking to secure a steady income in retirement, but they are not one-size-fits-all. Jake and Nick break down the two main types of annuities: income-focused and growth-focused. Income-focused annuities, like Social Security or pensions, provide guaranteed payments over time, offering financial security. However, they also lock your money away, limiting flexibility. Growth-focused annuities, on the other hand, aim to grow your investment over time, with varying levels of risk and reward.

Before determining what’s best, you have to make sure you are doing the proper plannig. As Nick points out, “What everybody needs in retirement is income, but what they really need is cash flow.” Understanding your unique financial goals and needs is crucial in determining whether annuities are the right fit for you. Jake adds, “No one investment is right for all of your money,” highlighting the need for a diversified investment strategy.

Beyond annuities, we explore the pros and cons of pension options. If you have a pension with a lump sum option, deciding between taking the lump sum or opting for monthly income requires careful consideration. The flexibility and control offered by rolling a lump sum into an IRA can be beneficial for many, but it’s essential to weigh the tax implications and your income needs.

By understanding the nuances of annuities and the importance of a tailored investment strategy, you can make informed decisions that align with your retirement goals. For those ready to take charge of their retirement planning, we offer a valuable resource: the “Are You Ready to Retire?” starter kit. This kit helps you assess the characteristics your portfolio needs to achieve your retirement goals. To get your starter kit, simply text the word KIT to 800-757-0436.

Here’s what we discuss in this episode:

0:00 – Intro

1:29 – Today’s question

3:20 – Types of annuities

5:22 – Goals for your money

6:47 – Other considerations