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Laddering annuities can be positive option

06/03/11

With the ongoing uncertainty plaguing the country's stock market, people may find themselves searching for safer investment options. Experts believe laddering the purchase of annuities may provide just that, according to Financial Planning.

An annuity allows people to receive a fixed monthly income based on the amount of their original investment, the Pension Planner reports. However, since interest rates are so low right now, people may not be getting as much out of these investments as they would like to. That is where laddering comes into play.

Laddering annuities means buying them gradually over time, hoping for an increase in interest rates at some point. This way the same amount of money will still be invested, it might have the ability to bring in a higher return, according to the news outlet.

"What we've found in this and earlier studies is that people facing retirement want guaranteed income, and they also want liquidity, so purchasing annuities over a period of time, even into retirement, makes sense," Olivia Mitchell, a professor of insurance and risk management at the Wharton School of the University of Pennsylvania, told Financial Planning.  

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