Those seeking reliable retirement income frequently turn to a deferred annuity. An annuity is a contract, commonly with an insurance carrier, that pays out money over time, usually during retirement.
Basically, the individual contributes money up front, either over time or in a lump sum. Subsequently, their income stream is deferred until retirement.
Depending on the agreement, the annuity often pays out monthly, and usually throughout the person’s life. The contract may also pay regular survivor’s benefits to beneficiaries.
With deferred annuities, how interest accrues depends upon the annuity’s structure. Thus, carefully assess personal needs and objectives before deciding on annuity type.
By Return
By Term
Whether the chosen structure is fixed, variable, or index, the individual must also decide when the annuity pays out.
There are a number of benefits associated with deferred annuities. They include:
Their benefits notwithstanding, there are drawbacks to deferred annuities, including:
There are drawbacks, but a guaranteed income stream upon retirement is attractive to many people. Purchasing a deferred annuity could make sense if retirement is nigh. Combined with Social Security, an annuity could provide a great deal of security. But research carefully first.
A variable deferred annuity might work best for those who seek the prospective return of stocks sans some of the risks. With one of those, money is deposited in stock mutual funds and others. Minimum guaranteed income may be provided.
Note that if an annuity is needed sooner than a year out, an immediate annuity may be better than a deferred annuity.
In terms of eligibility, the person can be as young as 18, depending upon their financial situation, goals, and life expectancy. Some advisors say it is best to begin receiving payments between ages 70 and 75.
Planning for retirement is one of life’s most important undertakings. Those seeking retirement income do have options, including a deferred annuity.
Another option is through Yieldstreet’s IRA, which can help build retirement wealth. Yieldstreet — one of the leading alternative investment platforms — has unlocked investments for IRAs that once were restricted.
The offering by Yieldstreet allows the addition of private-market investments to tax-advantages accounts. From art to private credit to real estate, Yieldstreet offers more alternative asset classes than any other platform. Some 85% of its investments are available to retirement accounts.
Accounts that can be transferred in their entirety or in part include traditional, Roth, SEP IRA, or SIMPLE IRAs. It is also possible to roll over a 401(k) or contribute new funding for any retirement account type.
Because retirement dollars are essential to optimize due to their tax favorability, individual retirement accounts can potentially be an ideal way to enhance private market growth and income.
Because of their comparably longer time horizon, an IRA can be effective in allowing private-market assets. Generally less liquid, such assets can draw improved risk-adjusted returns.
Public market volatility can render retirement portfolios vulnerable. Private assets have relatively low correlation to the stock market and can help diversify holdings.
Traditional portfolio asset allocation envisages a 60% public stock and 40% fixed income allocation. However, a more balanced 60/20/20 or 50/30/20 split, incorporating alternative assets, may make a portfolio less sensitive to public market short-term swings.
Real estate, private equity, venture capital, digital assets, precious metals and collectibles are among the asset classes deemed “alternative investments.” Broadly speaking, such investments tend to be less connected to public equity, and thus offer potential for diversification. Of course, like traditional investments, it is important to remember that alternatives also entail a degree of risk.
In some cases, this risk can be greater than that of traditional investments.
This is why these asset classes were traditionally accessible only to an exclusive base of wealthy individuals and institutional investors buying in at very high minimums — often between $500,000 and $1 million. These people were considered to be more capable of weathering losses of that magnitude, should the investments underperform. However, that meant the potentially exceptional gains these investments presented were also limited to these groups.
To democratize these opportunities, Yieldstreet has opened a number of carefully curated alternative investment strategies to all investors. While the risk is still there, the company offers help in capitalizing on areas such as real estate, legal finance, art finance and structured notes — as well as a wide range of other unique alternative investments.
Moreover, investors can get started with a relatively small amount of capital. Yieldstreet has opportunities across a broad range of asset classes, offering a variety of yields and durations, with minimum investments as low as $10000.
Learn more about the ways Yieldstreet can help diversify and grow portfolios.
As an insurance contract, deferred annuity can generate retirement income and can make financial sense for some. However, there are risks and disadvantages, so it could be wise to discuss options with a financial advisor.
Remember, too, that rather than realizing capital gains or income upon the maturity of every private market investment, dollars can compound in a tax-advantaged retirement account.
What's Yieldstreet?
Yieldstreet provides access to alternative investments previously reserved only for institutions and the ultra-wealthy. Our mission is to help millions of people generate $3 billion of income outside the traditional public markets by 2025. We are committed to making financial products more inclusive by creating a modern investment portfolio.