In retirement, you start to look for ways to turn your investments and savings into regular income while attempting to protect your principle. Traditional investment vehicles such as stocks and bonds may offer dividends and interest payments but their values may fluctuate with the market.

Another option to consider is a fixed annuity that offers regular income while safeguarding principle. An annuity is not government-backed security. An annuity buyer funds a contract with an insurance company that agrees to make payments on a future date or a series of dates. Like 401k plans, annuities grow tax-deferred but unlike 401k’s there are no contribution limits allowing an annuity buyer to invest larger amounts of money and defer paying taxes on any capital gains. Different types of annuities can be combined and creative ways.

One strategy uses an immediate and affixed annuity to generate income and rebuild the principal. Here’s how it works. An investor divides $300,000 between a fixed [inaudible 00:00:59] immediate annuity and a single premium deferred annuity. Assuming the immediate annuity paid a hypothetical 3% return the deferred annuity paid a hypothetical 5% return and a ten-year contract for both. The immediate annuity would begin paying $1138 a month. Meanwhile the funds in the deferred annuity would grow to $300,000 effectively replacing the principle.

Combining annuities can be a creative approach to generating retirement income. To see how annuities can work for you, call today and schedule your review.