Nathan Bacal Financial

Planning for retirement starts when you’re young. At least that’s how it’s supposed to work. Every investment you make, throughout your lifetime, should be part of a long-range plan to make sure that your retirement years are happy, stress-free ones.

The theory goes like this: When you’re young, you invest in riskier vehicles. As you age, you slowly begin moving your investment dollars from high-risk, high-reward investments to steady, surer ones. These latter investments won’t have the big rewards, but they won’t have the big risks, either. It’s a way to protect your money as retirement draws near.

People, though, tend to make two common mistakes when investing: First, they start saving for their retirement years too late. This limits the amount of money they can earn. Secondly, they get too comfortable with one investment strategy and never take the time to diversify their dollars.

This last problem is a serious one. It can lead to your money shrinking instead of growing. No investor should ever grow complacent. There’s always room to explore and diversify.

Financial experts always recommend that individuals diversify their investment dollars. This means that you should sink your dollars into a wide range of investment vehicles. Try the stock market. Consider an annuity. Look at mutual funds, certificates of deposits, bonds and other investment options. It’s when you place too many dollars into one particular investment vehicle that you increase the risk of watching your investments lose value.

After all, say the stock market takes a sudden nosedive. If you have most of your investments tied into it, your savings will take a nosedive, too. However, if you have your investment dollars tied into not only stocks, but other investment vehicles, too, your wealth won’t take nearly as serious a hit.

Meet with your financial advisor to discuss the diversity of your investment portfolio. Your advisor might be able to recommend some new homes for your investment dollars.

It’s never easy to plan for your financial security in your retirement years. Most of us can’t even fathom the day when we no longer report to work on a daily basis. But that day is actually closer than you think. By investing in a diverse array of financial tools, you can help ensure that your retirement years are happy ones. No one, after all, wants to spend these years worrying about paying the bills.

You don’t have to search too hard on the Internet to find some financial expert with something negative to say about annuities, both standard ones and variable annuities. These products are not sound investments, they’ll say. They don’t provide the amount of returns that investors can get by sinking their dollars into other savings and investment vehicles. So should you run out and buy annuities for your portfolio?

In short, the financial press rarely has a positive thing to say about the potential of annuities.

Why is this? What, exactly, is it about these financial products that experts view as so objectionable?

A recent column by financial guru Terry Savage on MSN Money sums it up well: She says that investors should consider annuities, but only as a last resort. That’s not exactly high praise. Why should these products be considered as a last-ditch investment opportunity? According to Savage it’s largely because annuities sometimes come with sizable fees. She refers to it as financing the retirement of an insurance salesperson.

There is certainly truth in this. Consumers do have to do their homework before signing up with any annuity. Some companies and salespeople do charge outrageous fees. That’s why it’s so important for investors to get in writing exactly how much they’ll be paying for their variable or tax-deferred annuity.

Of course, you could say the same about most any investment vehicle. Consumers must always do their research, whether they’re considering investing in the stock market, buying real estate or choosing a new mutual fund. Consumers need to know exactly what it is in which they are investing.

But, and this is important, an annuity with reasonable fees can be an important part of anyone’s investment portfolio. That’s because annuities provide investors with a check every single month. That is guaranteed money. It’s also a safety net. We all know that the current economy is a terrible one. People are losing their jobs. They’re watching as the values of their homes are plummeting. Many folks have used up their savings. They are struggling.

Annuities provide a hedge against future uncertainty. You can always count on those guaranteed checks. It’s a way to feel some security in a financial world that’s anything but secure.

So, yes, the financial press is unnecessarily harsh on annuities. These are investment vehicles that certainly have a place in today’s economic world. Don’t let your opinion of them be unnecessarily soured because of the financial analysts. Meet with your own financial planner. Study your own financial situation. And ask the right questions.

You just might discover that an annuity makes financial sense.