RETIREMENT PLANNING » IRA & ROTH ACCOUNTS

A stable-value fund is an excellent way for those approaching retirement age to diversify their portfolios. Stable-funds tend to offer higher returns on interest than a money market account, but have a bit more risk involved. Until recently, stable-value funds were an incentive only available through employer 401k benefit plans, but things have changed. Now individual investors can take advantage of this conservative type of investment through their IRA.

Stable-value funds are made up of "synthetic guaranteed investment contracts" or wrapped bonds. They tend to be high quality, shorter termed bonds that are bound by insurance wrappers. If the stable-value investment declines below the wrappers rate of return, the insurer fills in the financial gap; thus, stabilizing the funds value. However, if the stable-value invest grows beyond the wrapper return, the fund gives the monetary difference to the insurer.

If you are planning your retirement then a stable-value fund can provide a good diversification in your portfolio. Stable-value funds are fixed income investments, derived of an assortment of high quality bonds. The investments tend to be consistent with their delivery - so capital investments are predictable.

The stable-value fund market is extremely large and flush with cash. 33% of the stable value investment is from employee-directed 401(k) plans and total $396 billion in value.

Those considering this type of investment strategy should thoroughly investigate their options, as well as properly research all the fees associated with these types of investments. Private investors choosing to diversify their IRA portfolio may be hit with up to a 1% fee according to the Stable Value Investment Association.

Plus, there are redemption rules specific to stable-value commodities. Most stable-value funds have no withdrawal restrictions. However, since these investments tend to be part of a person's retirement strategy, there may be penalties associated with that fund.

Annuities can give individuals peace of mind when it comes to preparing for their retirement or long term challenges they might face. A head of a household may consider an Annuity schedule of taking care of their family if they are no longer able to.

Life insurance companies are responsible for issuing Annuity contracts. The Annuity contract is created when an individual provides a life insurance company with the financial resources to be invested on a tax-deferred basis and then paid back to the owner in several ways, usually on a predetermined payment schedule. This legal agreement provides a guaranteed payment until the death of the people named in the contract.

Basically, investors and insurance companies have a contract where the investor makes a lump-sum payment or agrees to make a series of payments. Then, the insurer will make payments back to an investor either in a lump-sum amount or on a payment schedule. Annuities offer an option for tax-deferred growth and may also include a death benefit.

Annuities can be either fixed (where the insurance companies guarantees a minimum rate of return while your account is growing) or variable (where the rate of return fluctuates when based on the different investment options you can choose from). The Securities and Exchange Commission regulates variable annuities but not fixed annuities.

Since the average person's life span is increasing well beyond their retirement age, an Annuity contract can help investors have income and not outlive their investments. Annuities are another variety of investment consumers can choose from when diversifying their portfolio. This type of investment can be especially helpful when it comes to individuals planning for their retirement. Annuity investments may become extremely popular if the push for privatizing Social Security comes to fruition. By combining an Annuity with Social Security, employer pensions, 401(k) plans, IRAs and other assets one can have a stable retirement.

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