If you’re beginning to think about retirement, we hope you’re in your thirties. Twenties would be even better, but thirties (or even forties) still gives you plenty of time to save for retirement. The first thing you want to do is stop spending lots of money on life insurance. We’re not saying don’t have any. Quite to the contrary, have lots. Term Life Insurance allows you to give your family a real source of income that can take care of them while not bleeding you through the nose.

Retirement Benefits

Of course, you should take full advantage of any retirement or investment packages your employer offers. While the market has some people skittish these days, this is actually the best time to be investing. Don’t throw caution to the wind, but do invest with a long term strategy. And anytime your employer is willing to match funds, max out.

The Safety of Annuities

With that said, however, more and more people are discovering annuities as a safe and profitable retirement vehicle. They don’t provide the sexy rates of return you see on stocks and some mutual funds, but they do guarantee a reasonably good rate of return. And generally, they allow for you to prosper more when the market is good. Annuities, like some other investments, pay out incrementally to you when you retire (or whenever you decide, really), and guarantee you an income for life.

Basically, it comes down to this: slow and steady wins the race. There are relatively few costs taken out of your investment dollars for annuities (one of the reasons some agents and brokers don’t want to sell them to you), so most of your money is put directly into the annuity. Studies of the market generally show that a constant rate of return will do better by you just about every time, when compared to the fluctuations of the open stock market.

Whole Life, Term Life and Annuities

If you currently have permanent life insurance, one way you can prepare for retirement is to cash out your permanent policy and buy a much larger term life insurance policy, using the difference in premium price to fund an annuity. The cash value will accrue much faster, giving you a better nest egg for retirement.

This should go without saying, but just in case, here goes: before you cash out any life insurance policy, make SURE that you are going to be able to qualify for new life insurance. Permanent insurance is grossly overpriced, but if you have a health problem that would preclude you from getting term or other life insurance, stick with what you have and keep paying the premiums. It’s better than nothing.

Regardless of what you do with your insurance or investments, consider adding an annuity with a guaranteed rate of return to your portfolio. In the end, regardless of what the market does, you’ll be glad you did.

Photo via Adam Pniak