Life insurance annuities an option when diversifying retirement income

Nov 09, 2010

Annuities may be part of sound financial planning.

Even with the best of intentions, consumers may fall into some common retirement savings traps as they plan for their later years.

Recently,, a website that connects consumers with money experts, illustrated some of the typical mistakes consumers make when planning for retirement. One of those is not having multiple sources of income later on.

"By diversifying, retirees can avoid losing all their income if one source loses value," the website said. "Guaranteed sources can include Social Security, pensions and annuity payments."

There are a number of ways consumers can approach investing in an annuity. First, they may consider whether they want a fixed or variable form of the product.

Fixed annuities are generally tied to the financial performance of the life insurance company that issues them. While they are more stable, they also provide less of a payout. Still, they may be a good option for those in their later years of investing.

Meanwhile, variable annuities are tied to more volatile investments, such as the stock market. While they present the possibility of greater returns, the also present more risk.

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