If you are like many pre-retirees or retirees, you may be hesitant to purchase annuities because you worry you will enter the market at the wrong time and won’t maximize your returns. An increasingly popular technique known as “annuity laddering” may help guard against this situation and make the transition to annuities much easier and less stressful for you.

Building an annuity ladder means that you purchase a series of annuities over time instead of dumping a lump sum into one annuity that locks you into one rate. With a ladder, you split your premium across multiple smaller annuities. For instance, maybe you decide to buy one annuity every two years for the next 10 years. Or you buy one annuity per year for the next five years. An annuity ladder works by investing in multiple annuities, each with a different maturity date. As each annuity matures, you can use the payout to cover expenses in retirement. This strategy can provide you with a steadier income than other investment options, and it can help to hedge against inflation.

An annuity ladder is a technique that can be used to maximize the returns on an annuity investment while still providing security during retirement.

Since predictions of whether interest rates will go up or down are at best educated guesses, an annuity ladder lets you bet on both scenarios. A ladder may increase your chances of earning more when rates go up or smooth out losses if rates go down.

There are many ways to build annuity ladders for yield, including fixed-rate ladders using multi-year guaranteed annuities (MYGAs). You can also use a “mixed-fix” approach combining MYGAs and fixed-index annuities. Deferred multi-year ladders work in a somewhat similar fashion to certificates of deposit (CDs).

Another approach is the deferred multi-year annuity ladder. You take a lump sum to purchase several small annuities in a deferred multi-year annuity ladder, each with a different maturity date. As each annuity matures, you either roll it over into a new annuity or convert it to income.

There are several benefits to using an annuity ladder in retirement. First, it provides flexibility and control over when and how much income is received. Second, it can provide a steadier stream of income than other retirement income sources. And third, it can help to protect against inflation.

Creating an annuity ladder may not work for everyone. Still, it is worth bringing up with your retirement advisor, especially if you find yourself on the fence about adding safe money products to your portfolio.

Lyle Boss, a native Utahn, is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management. Boss Financial, 955 Chambers St., Suite 250, Ogden, UT 84403. Telephone: 801-475-9400.

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