Being able to save on a tax-deferred basis is a key component of retirement planning which is commonly called annuities. Annuities allow you to save money on which taxes are due only when you start withdrawing your money which in many cases is years later.
Annuities are a great way to save for your retirement and to make sure that you have sufficient funds to last you for the rest of your lifetime. Some people are unlucky in that they pass away before they start receiving their annuity payments. In such cases, the annuity payments are given to their beneficiaries.
When saving for retirement, you need to be aware of a real subtle threat to your savings which is inflation. I am sure that you have heard about inflation. It is one of the few factors that affect economies globally. Inflation can simply be defined as money losing its purchasing power. Every economy experiences a certain percentage of inflation on a yearly basis. As a result of inflation, money loses its value.
The effects of inflation on short-term savings are not very noticeable but the effects of inflation on long-term savings such as annuities are very noticeable. The effect of inflation on annuities is that value of the money that you are saving now will decrease significantly in years to come. The wealth that you are accumulating may not be able to buy half of the things that it can purchase now.
So what can you do about inflation? The answer is simple. You need to find ways to fight inflation and outsmart it. When it comes to annuities, one of the best ways to fight inflation is to opt for variable annuities which provide the potential for returns which will exceed inflation on a long-term basis. Variable annuities are indeed riskier than fixed annuities but they can help you to overcome the effects of inflation. However, you should not risk all of your wealth in aggressive investments such as variable annuities. You need to be able to balance your portfolio by choosing different investment and savings options that will help you fight against the effects of inflation with the least risks possible.