Risk Versus Time Committment

Financial Oversight: Overlooking alternatives for protecting your retirement accounts.

Balancing Risk and Time Commitment

When considering effective savings options, ideal attributes typically include:

1. Strong potential for competitive interest earnings

2. No risk of losing value

3. Immediate access to funds

However, such an ideal scenario often does not exist in practice. Generally, investments that offer both short-term access and high returns will entail some level of risk.

For those seeking returns that exceed low savings rates, the common trade-off is between making a Risk Commitment or a Time Commitment.

Many investment vehicles inherently carry the risk of value depreciation. Even with immediate liquidity, there is the distinct potential of realizing less than your original investment—this reflects a risk commitment.

Fixed annuities present an alternative by allowing for reasonable interest earnings while mitigating exposure to market risks. In this case, investors make a time commitment with a substantial portion of their funds instead of assuming risks.

It’s important to note that fixed annuities implement surrender penalties only if withdrawals exceed the specified penalty-free amounts, which are established within the contract’s surrender schedule. Most fixed annuities typically provide the following liquidity options:

#1 – Up to 10% penalty-free withdrawals annually, accommodating income needs or emergency situations. For individuals with emergency funds outside of the annuity, this level of liquidity usually suffices. It’s widely acknowledged that withdrawing more than 10% of your investment annually could lead to depleting funds over time, especially concerning for long-term savings.

#2 – Additional penalty-free access for unforeseen circumstances, such as long-term care costs (varying by contract).

#3 – Many fixed annuities guarantee a future selling price for liquidating the full contract. This feature is not commonly found in numerous other financial products. Current offerings often include surrender schedules ranging from 5 to 15 years, with most contracts featuring a declining penalty structure over time.

Early withdrawal penalties serve to safeguard the insurance company issuing the annuity, thereby providing a level of protection for the contract owner.

If you view a significant portion of your retirement savings as intended for long-term growth, the penalty-free features of an annuity could offer sufficient liquidity, facilitating a time commitment instead of a risk commitment.

Why not consider a temporary time commitment for your long-term funds instead of jeopardizing your retirement savings?

We invite you to schedule a complimentary, no-obligation financial review with a Future Benefits Agent.

For further assistance, please give us a call at 901-754-2040.

*Please note that we are not stock brokers or financial advisors and do not provide investment advice. **The liquidity provisions vary by annuity contract. The information provided in this section is intended to be general, as the details and guarantees of fixed annuities differ from one contract to another. We advise consulting with your agent and reviewing company materials regarding each specific contract. ***Withdrawals from non-qualified annuities before age 59½ may incur a 10% Federal tax penalty on the interest withdrawn. We do not provide tax advice.

See our Professional Disclaimer for more details.