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  • Writer's pictureRetirement and Annuity Advisor Jennifer Lang

Seven US Pension Plans Warned They Will Run Out of Money By 2028.

Updated: Jan 28, 2022

Seven struggling public funds could have a severe impact on state finances as their funded ratio drops.

  • If stock market weakness continues, the public pension plans of Kentucky and Providence, along with the Dallas Police and Fire, Charleston Fire and Chicago Police could be affected.

  • The Chicago Teachers Fund, the New Jersey Teachers fund and Chicago Municipal public pensions also face some of the biggest risks.

The crunch point of a plan running out of assets is known as the “depletion date”. After this point, a US plan would move to a so-called “pay-as-you-go” arrangement where retirement benefits are paid solely from contributions by employers and employees.

More than half of us have some level of investment in the market — mostly in retirement plans such as 401(k)s. Recent market volatility may have left you rethinking how much risk you’re willing to take with your nest egg, especially if you’re in or nearing retirement.

Thinking differently about risk

It’s one thing to answer hypotheticals about saving and losing money when you’re planning for the future. But watching your 401(k) balance tumble in market downturns sheds light on the real‑world implications. If recent events have diminished your appetite for risk, now might be the right time to reassess your retirement savings plan.

The following video examines how retirees and pre-retirees can take pressure off of their retirement portfolio.

Reducing your exposure to volatile markets and locking in some income guarantees may help you feel more confident about staying on track for the long‑term. Two strategies worth considering include:

  1. Allocating more of your savings to fixed‑income options

  2. Putting a portion of your portfolio in annuities

Finding comfort across the spectrum Annuities are designed to help you achieve your retirement savings goals and provide future income. By insulating you from major financial risks like stock market losses or outliving your money, they could be part of a solution that helps you stay in your financial comfort zone.

Diving deeper into annuity options While all annuities are designed to provide income, there are different kinds to align with your accumulation goals and how much risk you’re comfortable taking.

  • Immediate Annuity Carrying the lowest risk, immediate annuities convert your premium payment to a guaranteed income stream for life, or for a specific period.

  • Fixed Annuity Fixed annuities offer a fixed interest rate that’s guaranteed for a certain time period. The guarantee may appeal to you if you’re willing to sacrifice the potential for higher returns when the markets rise.

  • Fixed Indexed Annuity In the middle of the spectrum, fixed indexed annuities have become increasingly popular with people who have a moderate appetite for risk. You can earn interest credits based in part on the upward movement of a stock market index while enjoying protection of a zero percent floor. If the net change in the index over a given crediting period is negative, you would earn zero interest credits for that period, but never less than zero.

  • Registered Index-Linked Annuity These products are designed for people with a higher risk tolerance. Registered index-linked annuities offer the potential for index credits tied to index performance while providing a measure of protection from market loss.

Economic repercussions have led many people to rethink their appetite for risk. This may be the time to talk with a financial professional about ways to keep your retirement savings better protected, especially in the event of future downtowns.

If you are 5 to 10 years away from retirement, contact for a Guaranteed Retirement Income Strategy. Learn how not to run out of money in retirement .

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