Have you heard the saying “don’t put all your eggs in one basket”? This is a wise saying when it comes to your retirement savings.
Investing can help your money grow, but it also comes with risk. If all your savings are tied to one type of investment and it underperforms, your retirement plan could take a hit. Diversification helps reduce that risk by spreading your money across different options.
As Investopedia explains, diversification is “the process of spreading investments across different asset classes, industries and geographic regions to reduce the overall risk.”
When your savings are diversified, poor performance in one area can be offset by stronger performance in another. This balance can help you avoid dramatic swings in value and work toward steadier, more reliable growth.
Life insurance and annuities: two ways to diversify
Insurance products like indexed universal life insurance (IUL) and fixed indexed annuities (FIAs) can play an important role in a diversified retirement strategy. They allow your savings to grow conservatively while protecting you from market downturns.
- IULs provide protection for your loved ones if you’re no longer there, while also giving you the opportunity to save more for retirement in a tax advantaged way, beyond annual 401(k) limits.
- FIAs grow tax-deferred and can be designed to provide accumulation, guaranteed retirement income or both.
These products can become especially valuable as you near retirement, when you have less time to recover from market losses.
Diversification within your policy
Some life insurance policies and annuities also let you diversify within the policy itself through different interest crediting options.
For example, you may be able to allocate your premium and interest across a variety of options, such as indexes that track the performance of well known groups of stocks like the S&P 500®. If you choose one of these index-linked options, you can expect that:
- Your money isn’t directly invested in the stock market.
- You will earn interest credits based on the index’s performance.
- If the index goes up, you can receive a portion of the upside (subject to caps, spread and participation rates).
- If the index goes down, you won’t lose money.
This built in flexibility can help you balance growth potential with protection. It’s important to remember that both IUL and FIAs may have associated fees, so always review your policy documents carefully.
A balanced basket for retirement
Overall, these products can be valuable “eggs” in your retirement basket, helping you diversify, reduce risk and protect your savings for the future.
Learn more about how F&G’s life insurance and annuity solutions can help you build a more resilient retirement strategy.
