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Here's some more retirement planning advice for people who are more concerned about safety than returns.
If you have a fixed-rate annuity with a guaranteed minimum floor of 3 percent, don't be in a hurry to surrender it, advises Investment News, a publication written for investment advisers.
Six or seven years ago, that was a common minimum return, although most people who bought variable annuities at that time were earning more. At that point, 3 percent seemed paltry, but these days 3 percent, especially 3 percent tax-deferred, seems pretty good.
New fixed-annuity contracts are offering guaranteed minimum rates of 1 percent to 2 percent, and 10-year Treasuries are paying less than 2 percent. So if you bought a fixed-rate annuity a few years ago, think long and hard when the company that sold it to you calls to urge you to roll it over into something else.
Another good thing about annuities that have passed their surrender period is their liquidity. If you need the money, you can access it without penalty -- beyond having to pay any taxes due, of course.
Annuities are increasingly popular among people living on retirement savings. MetLife, the largest seller of variable annuities in the U.S., reported last November that sales rose 22 percent in the third quarter to $8.5 billion. These aren't your grandma's annuity plans -- they can be a good idea for someone who feels a strong need for safety and predictability. But the fees are often shockingly high and the contracts difficult to understand so shop carefully.
And remember, the financial market is cyclical. We're stuck in a down period now, but believe me, nothing lasts forever. Rates will rise. So don't be sidelined because you locked all your money up tight.
