From Eveningsnews.com
Feel-Good Retirement Strategies How the ‘“Emotion Quotient’” Impacts Your Retirement Equation
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Dec 24, 2007, 12:06
(ARA) - How you feel about your investments can greatly influence their ultimate outcome. That’s the finding of a recent study exploring the link between emotions and financial decision-making in investors approaching, or in, the critical investment window five years before and after retirement.
In its “Behavioral Risk in the Retirement Red Zone” report, Prudential Financial, Inc. sites five dominant emotions and tendencies that can influence investment decisions: fear, regret, inertia, aggressiveness, and susceptibility.
The study also found:
* Three of four investors -- 76 percent -- are affected by their emotions to a moderate or high degree.
* Emotions can influence investors to react in ways that may not be in their best interest.
* Products that provide both accumulation and income guarantees help mitigate the effects of behavioral risk.
“The role emotions play in investment and retirement decisions is being recognized as an important factor in creating a successful retirement,” says David Odenath, president of Prudential Annuities. “For Americans in the The Retirement Red Zone, understanding the emotions that can influence their behavior can help moderate the potential negative effects of behavioral risk.”
If there’s one thing everyone wants during retirement, it’s financial security. When confronted with market fluctuations and losses on retirement savings, it’s natural to feel some concern or even fear. Problems arise when short-term losses cause you to hastily switch investment strategies and lose sight of long-term goals.
The Potential Advantages of Variable Annuities
For those concerned about how their emotions might influence their investment strategy, a variable annuity can offer some help. A variable annuity is a contract between you and an insurance company, under which the insurer agrees to make periodic payments to you, beginning either immediately or at some future date. You purchase a variable annuity contract by making either a single purchase payment or a series of purchase payments.
A variable annuity offers growth opportunities through a range of investment options, typically that invest in stocks, bonds, and money market instruments.
Advantages include:
* Death benefit. Variable annuities offer a guaranteed death benefit. If you die before payments begin, your beneficiary is guaranteed to receive a specified amount -- typically at least the purchase amount.
* Tax-deferred growth. Variable annuities are tax-deferred. That means you pay no taxes on the income and investment gains from your annuity until you withdraw your money.
* Guaranteed income for life. Many variable annuities offer, for an additional fee, the ability to receive periodic payments for the rest of your life (or the life of any other person you designate), which protects against outliving your assets.
Annuity guarantees are based on the claims-paying ability of the issuing company, so it’s important to choose one with proven financial strength.
When it comes to investing for retirement, emotions can run high. Whether you feel confident, anxious, regretful, or a mix of emotions regarding your investment strategies, now is a good time to meet with your financial professional to discuss all of your options, especially if The Retirement Red Zone is drawing near. Your financial professional can help determine which annuity product, optional benefits, and investment allocation may be suitable for your retirement needs. And that’s something you can feel good about.
Investors should consider the contract and the underlying portfolios’ investment objectives, risks, charges and expenses carefully before investing. This and other important information is contained in the prospectuses, which can be obtained from your financial professional. You should read the prospectuses carefully before investing.
Your needs and the suitability of an annuity product should be carefully considered before investing. When evaluating your needs, please consider other variable annuities available from Prudential Financial companies.
Variable annuities are issued by Pruco Life Insurance Company (in New York, by Pruco Life Insurance Company of New Jersey), Newark, NJ and distributed by Prudential Annuities Distributors, Inc., Shelton, CT. All are Prudential Financial companies and each is solely responsible for its own financial condition and contractual obligations.
All guarantees are backed by the claims-paying ability of the issuing company. Guarantees do not apply to the underlying investment options.
Annuity contracts contain exclusions, limitations, reductions of benefits and terms for keeping them in force. Your licensed financial professional can provide you with costs and complete details.
Optional living and death benefits may not be available in every state and may not be elected in conjunction with certain optional benefits. The fees are in addition to fees and charges associated with the basic annuity. See the prospectus for more detailed information.
Courtesy of ARAcontent
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EDITOR’S NOTE:
This material was prepared to support the promotion and marketing of variable annuities available through Prudential. Prudential, its affiliates, its distributors and their respective representatives do not provide tax, accounting or legal advice. Any tax statements contained herein were not intended or written to be used, and cannot be used for the purpose of avoiding U.S. federal, state or local tax penalties. Please consult your own independent advisor as to any tax, accounting or legal statements made herein.
Variable annuities are long-term investments designed for retirement purposes. Investment return and principal value of an investment will fluctuate so that an investor’s unit values, when redeemed, may be worth more or less than their original cost. Withdrawals or surrenders may be subject to surrender charges. Withdrawals and distributions of taxable amounts are subject to ordinary income tax and, if made prior to age 59 1/2, may be subject to an additional 10 percent federal income tax penalty. Withdrawals, for tax purposes, are deemed to be gains out first. Withdrawals can reduce the living benefit, death benefit and account value.
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