So what is retirement supposed to look like?  It’s different for everyone.  I personally think it looks like no more offices, or meetings, or timed lunch breaks, or horrible bosses.  i see my work being done on a volunteer basis, maybe work on the house, travel to see the kids and grand kids, travel to different countries, and of course, golf.  I can do all of this now while I’m working of course, but my income allows me that. When I stop working, my income is going to be fixed, and i may not be able to do everything on that.  So what am I going to do?  I’ll share.

I have 3 buckets of savings for retirement.  One is for my fixed expenses. Mortgage ( assuming I still have one, I hope not), gas, food, utilities, insurance etc.. No matter what happens, I won’t be out in the street. I won’t be able to splurge on things, but we have a roof and food.  A second bucket is put aside for my hobbies.  I will have to figure out the cost of fun in my area, or how much I want to travel every year.  Let’s say my wife and I do one big trip a year, what’s the cost?  $5,000? maybe.  Golf, maybe a few hundred bucks a year.  All in all, my bucket will cover these extra activities.   My third bucket is a savings bucket.  That’s right, you heard it.  there will be a bucket that I will put some money aside in savings.  You have to still save during retirement.  It should never stop.  It could be $500 a month, it could be $250 a month.  I don’t know what that number is going to be yet.  This bucket will be allowed for emergencies.  I don;t expect to live forever, I fully expect to get old and more fragile and see my health decline.  If I go into hospital, the last thing I want to do is eat into the other buckets of money and put ourselves in a position of having to go back to work.

Your retirement is going to look different than mine.  But we all know how to use a calculator, pen, and paper.  Take the time to sit down and think about what you want to do.  PLAN.  Add it all up and figure it out. it isn’t hard to do.  The hard part is discipline of saving to get there.  But once you do, you’ll have the retirement you want.

Most Indexed Annuities offer riders on their contracts.   In the indexed annuity world there is no standard to the names of these riders so many times they vary from carrier to carrier.  These riders include, but no limited to, nursing home rider (confinement rider), long term care rider, chronic care rider, terminal illness rider, income rider (GMWB, GMIB), death benefit rider, ROP (Return of Premium) rider, free withdrawal rider. Not all riders are available on all products.

Let’s define some of these riders:

A nursing home rider could be a couple of things. It could be that carrier waives all surrender charges if a client is confined to a nursing home.  Some carriers just increase the withdrawal percentage allowed or allow short annuitization options.  Sometimes a nursing home rider is a part of an income rider, where the payout is increased if the client is confined.  Usually a minimum about of days is required in the facility before the benefit will kick in.

A long term care or chronic care rider works very similar to a nursing home rider, except for the client does not need to be confined to a facility, but rather they can be receiving at home care.  Usually the client needs to not be able to complete 2 of 6 ADL (activities of daily living) before this benefit would be available. Again, a minimum time is usually required before this benefit is available.

A terminal illness rider usually allows for all surrender charges to be waived if the client has been diagnosed as terminal.

Income riders, also known as GMIB (guaranteed minimum income benefit) or GMWB (Guaranteed minimum withdrawal benefit) is a rider that guarantees a certain amount growth on an income account that the client can later draw from over their lifetime.  Usually these riders offer some sort of an annual guarantee. Currently these “guarantees” range from 4% to 12%.  Sometimes these “guarantees” are simple interest and sometime compound.  Remember, unless a death benefit is included in this rider, the value is usually not available to the beneficiaries and will disappear at death (spousal continuation available).  Income riders, in the general sense, are considered to be a living benefit.

A death benefit rider is usually a guaranteed annual return that is available to the beneficiaries. Sometimes these benefits go lump sum to the beneficiaries and sometimes they require some sort of payout like a 5 year annuitization for the beneficiaries to get the full amount.  Remember that these riders are not life insurance so there will be taxes required on the growth of the annuity (or the whole amount if is qualified money).  These riders almost always have fees associated with them.

A ROP (Return of premium) rider is a benefit that allows for the entire premium to be returned to the client at any time.  Sometime this rider is free and sometime there is a fee for it.

I was watching a documentary this past weekend on the alarming number of professional athletes who are forced to file bankruptcy.  If you haven’t seen the espn documentary, it goes through some of the high profile professional athletes and even has interviews with some of them to get their view on how they ended up with nothing after having millions.

Well, what if you were able to ensure that you would never lose all of your money, that you would never have to file for bankruptcy because you had guaranteed income for life?  If you could retire with the guarantee that you will receive the same amount of income for the rest of your life no matter how much money you invested, would you be interested?

If the answers to these questions are yes, then you may be interested in what we call a fixed-indexed annuity.  Annuities are designed to provide income for life, long-term care benefits, nursing home benefits, and death benefits.  You may be able to retire rich with the help of an annuity by ensuring that you will never outlive your money.

If the professional athletes profiled in the documentary had invested in a fixed-indexed annuity, they would have been guaranteed to never outlive their income and would have avoided bankruptcy and maybe retired rich.

What is an annuity and how does it work?  An annuity is essentially a contract between an individual and an insurance company.  The individual gives the insurance company “premium” in exchange for a set of specified guarantees, which often include options for income for life, long-term care benefits, nursing home benefits, and death benefits.  Many annuities have enhanced benefits which include income riders, and death benefit riders.

If you want to add an annuity to your retirement portfolio, then you need to do your research.  There are many independent websites which offer reviews on annuity products.  Insurance carriers also have their own independent financial ratings from third party agencies.  Most insurance carriers are between A+ and B.  The rating system goes from A+, A, A-, B+, B, and B- and can usually be found on the carriers website.  Although, one carrier might be a B rated carrier, it doesn’t necessarily mean that carrier is more likely to default on your guarantees.  Every insurance carrier is required to have specified allocations between safe investments and hedged investments.  The reason for this is to ensure that the carrier can make good on the contractual payments.

Fixed-indexed annuities are an effective financial tool which has the ability to ensure that you don’t outlive your money and gives you the opportunity to retire rich.  To find out more about fixed-indexed annuities and retirement advice, visit www.annuity123.com and www.annuitythinktank.com.

What investors once thought of as a prudent investment choice can now be a ball-and-chain that could very well sink that plan to have a safe and secure source of retirement income through bonds.

The good news is are life expectancies are longer, but that is bad news for retirees who are relying an income-producing portfolio to see them through the Golden Years; and for investors who are doubling-down on their bonds with some stock allocation, the outlook gets dimmer.

“If you’re invested only in bonds and you’re withdrawing 4 percent, plus inflation, your portfolio will decline,” said Maria A. Bruno, senior investment analyst at Vanguard. “That’s why we recommend that most people hold some equities. And why it’s important to be flexible.” In some years, investors may need to withdraw less than 4 percent, she said, and in some years they can take more.”

Holding bonds is not an entirely risk-free proposition: Bond prices can decrease when interest rates rise, since prices always move in the opposite direction of interest rates—of course, the opposite holds true as well.

What’s more, investing in bonds is not like putting money into a CD, whose price never fluctuates with market or interest rate conditions.

Contact us to discover the benefits of a guaranteed-income annuity to anchor your retirement portfolio.

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1. Is my principal protected from loss?  Yes it is.  Unlike securities, mutual funds, or variable annuities where your account balance fluctuates based on market performance, your index annuity is guaranteed against losses during market downturns.  You only participate in market related growth, but never market loss.
2. What happens to the value of my annuity during a year that the market performance is negative?  If the stock market is negative during a given year of your policy, your worst case scenario would be a return of 0% for that year.  Your principal is guaranteed.
3. How do years of positive growth affect the value of my annuity?  Not only is your principal protected, but any increases you realize are also locked in and can never be lost.  This feature, known as “annual reset”, is available on most fixed index annuities and is arguably the most powerful and unique feature found in this type of annuity.  This also happens to be a feature that I have never seen mentioned in the articles critical of index annuities.
4. Do I pay taxes on my gains?  All annuities accumulate tax-deferred, meaning you don’t pay taxes until you withdraw from the policy.  This tax-favored status allows your annuity the opportunity to accumulate faster because you earn interest on the money that you would normally have been taxed on.  It’s important to keep in mind that there is a trade-off for having this tax-favored status on your annuity.  If you make any withdrawals from your annuity prior to the age of 59 ½, the IRS will penalize you 10% of the withdrawal, in addition to the taxes owed.
5. Is my money safe?  All fixed index annuities are backed by the financial strength of the insurance company issuing the policy.  States also have what are referred to as “State Guaranty Associations” that guarantee a certain dollar amount per annuity in the event that the insurance company claims insolvency.   This amount varies on a state-to-state basis.  It is highly recommended that clients pay close attention to the ratings of the insurance carrier and stick with those carriers who have an A.M. Best rating of B+ or greater.
6. Am I locking my money up if I put it into a fixed index annuity?  Most index annuity policies have a surrender period ranging from 5 to 14 years.  However, during that period, almost all index annuities allow the client to withdraw up to 10% of the annuity’s value each year without penalty.  Annuities also allow for withdrawals through income riders and through annuitization.
7. What happens to my annuity if I die?  Your named beneficiary will receive the proceeds from your annuity, which is typically the accumulation value of the policy without any type of surrender penalty.  In most cases, a lump-sum or payout over a specified period of time can be taken.  Your annuity value also passes directly to your beneficiary and avoids the expense and delays that often come with probate court.

Planning for retirement with a disabled child is more than just, I have to save more. There are benefits, social security, and other costs you take into account. of course you will need more money than if it was just you.  According to isenbleck.com, if children are disabled before the age of 22 they may be eligible for Child Disability Benefits (CDB) when their parent retires, becomes disabled or dies, if the parent paid into the social security system while working.  This benefit is sometimes referred to as Disabled Adult Child benefits (DAC).  The child’s benefit amount is 50% of the parent’s social security benefit.  If the parent dies the CDB benefit is increased to 75% of the parent’s benefit amount.  If both parents are retired, disabled or deceased, the child will get the higher benefit amount of the two parents.

There are some rules about having a disabled person in your home and whether or not they qualify for benefits.  For instance, a minor disabled child of a low income family may qualify for SSI on his/her own right.  But to qualify as an adult disabled child off of the parents work record, the disability has to have occurred prior to age 22 with records.  A 25 year old who was in an accident and disabled, is not entitled to those same benefits.

All this being said, planning for retirement is going to be different, and in most cases more difficult. Chances are , if you are doing ok on your current level of income, including costs of caring, then you will be ok during retirement for your fixed costs on the same amount of money.  A good planner can work with you to determine how much you need to save in order to have a lifetime income of that amount.  It’s all the extra emergency money you are going to need that will be a burden financially.  There are low cost alternatives to medical insurance for those with disabilities to look into, and will help out tremendously in case something should go wrong.  But the fixed income now looms for all the little things forgotten about while working.  So now , you are savings for income that you are comfortable with, and you have to save probably as much for incidentals and emergency money.

Once you decide to speak with a planner on your situation, make sure that he or she knows everything there is to know so that they can (hopefully) get it right.  There are ways to transfer assets to adult disabled children without too much penalty, so a good elder law attorney couldn’t hurt either.  Even if you decide to have income for life transferred to your heir, the amount may interrupt their current benefits, so be sure to ask.

An alternative to annuities with enhanced death benefits is Simplified Issue Life Insurance.   “Simplified Issue” means little or no underwriting.  These solutions are built for older clients up to the age of 85, and they provide Tax Free death benefit versus a Tax Deferred death benefit.  In most cases you are able to access the Tax Free death benefit for assistance with funding Nursing Homes, if the client is terminally ill, or if they can’t complete 2 out of 6 activities of daily living.  Simplified Issued Life sometimes have the look and feel of an annuity  in regards to how it can grow, free withdrawals, loan provisions, bonuses, and return of premium features.

Now, you must be asking “What about Qualified Funds?”  Some carriers accommodate to Qualified Funds too.  Basically the carrier will transfer your Qualified Retirement Plan into a single premium immediate annuity that will fund the Tax Free benefit over a specific period of time.  If the client is over 70 ½, they must take RMD’s.  In this case, a 1099 will typically be mailed to them at the end of the year to report to the IRS.

Here’s how the process works:

The consumer must complete an application and a phone interview with the advisor and the client at the same time.  There will be a series of “Knock Out” questions you must get through to pass.  Once you’ve answered “No” to these questions, you must call the carrier to conduct the interview.  Typically it’s a verbal confirmation that the consumer has answered the questions correctly.   You will receive an approval or disapproval within 24 hours.  From there, you send up the application and a check.  A Policy is delivered within a week.  That’s it!

Now this isn’t for everyone.  Wealth Transfer Annuities are great!  They provide predictable growth towards a death benefit so consumer can sleep at night.  I would recommend comparing them both, and weighing your options to see what best for the client!