Annuity FYI Visitor Blog

In the Wall Street Journal, Brett Arends explains “How to Salvage Your Retirement.”  While there are people that have little to nothing saved and won’t be able to retire when they’d like, many people have employer sponsored pensions or home equity that will help them in retirement.  It’s not always enough though and a lot of Americans don’t have either of those options available.  According to a recent study, forty percent of workers are not saving for retirement.  Arends’ top tips follow.

• Work as long as you possibly can.  This gives you more time to save, allows the savings you already have or are now saving to grow, and lowers the number of years that you will need to use those savings to live.  Delaying Social Security payments is also wise because you will receive more each year.
• Lower your costs of living in retirement.  One of the best ways to do this is to live where the cost of living is low in the United States.  Moving somewhere in the central U.S. tends to have the lowest housing and living expenses.  Even moving a little farther outside of a big city makes a difference.
• Make a plan for yourself that isn’t concerned with leaving money to your heirs.  Immediate annuities and reverse mortgages help you to get more out of the same retirement money.  There are sacrifices to be made for both, so make sure the options are right for you.
• It can’t be said enough: spend less and save more.  While it seems like a simple idea, many people just are not following the concept.  Starting now, wherever you are in the retirement spectrum, will always make a difference and help your future money grow.

Use tax breaks for people over fifty to your benefit and save for 401k annuities and IRAs.  You are able to put more money into these accounts than those younger than fifty.  Take advantage of what the government has to offer.  Work longer, lower living costs, think about your own future, and save.

After President Obama’s Middle Class Task Force began the process of promoting annuities, the US Department of Labor (DOL) and the Treasury have put out a request for information, according to Money Management Executive’s “Treasury, Labor Dept. Issue RFI on Annuities in 401(k)s.  They are seeking out information on the benefits and drawbacks of using 401k annuities transfers to secure retirement income for Americans.  Since participants receive income in lifetime installments with annuities, the Treasury and DOL want to ensure that this form will work the best for the most people.

The American Council of Life Insurers was already excited about the Obama administration’s promotion of using annuities in different types of defined contribution plans.  They said in a statement that they are happy to provide information about the products to the Treasury and DOL.  The Insured Retirement Institute (IRI) will also be putting together annuity information for the departments to use in their research.  The government worries that an increasing number of retirees are opting for lump sum payments of their 401k or other plans.  With annuities, they purchase the product with that retirement money and receive a stream of income payments monthly that are guaranteed over a lifetime.  The departments’ RFI will help them gather more information for government recommendations.

In the Chicago Sun-TImes, David Roeder describes why there is “Little payoff seeking the next Google.”  He summarizes some of the latest financial news and goings-on.  Financial guys on TV always seem to be looking for the next company that will start from nothing and skyrocket to success, like Google or Apple.  But looking into the past 10 or so years, the companies with the highest expected growth potential actually had the worst annualized returns.  It seems that the lowest expectations in the stock market actually provide for the best investments.  There are some large companies whose stocks are being recommended by Chicago Investment banks like William Blair & Co.  Others are looking to invest in products that teenagers love: food & entertainment included.

Companies like MetLife, Hartford Financial, and AIG look to benefit from the Obama administration’s new recommendations.  They are looking to introduce rules that will push retirees to 401k annuities rollovers.  Currently only 2% of people with 401k’s convert them to an annuity in retirement.  Since annuities help to counteract the risk of outliving one’s savings, the government believes that this guaranteed income will help Americans through retirement.  Finance information is all over the news and has even seeped into the entertainment world.  A new documentary entitled “Floored” about the Chicago trading floors is playing in Chicago.  With the renewed public interest in financial freedom, information about stocks, annuities, and retirement is at the forefront of America’s publications.

Scott Burns of the Boston Globe was asked from a couple nearing retirement for some guidelines in their retirement planning.  In “Eliminating debt, assessing spending habits are essential to secure retirement,” the columnist gives his important steps towards retirement.

1. Get debt and spending under control.  Do what you can to eliminate all of your debt.  Lower your spending by taking stock of what you really need.  It might be wise to downsize your living arrangements or sell real estate and rent.
2. You must have a guaranteed monthly income.  An individual lifetime annuity or a joint and survivorship lifetime annuity will help secure the rest of your assets from being drawn down as much.
3. Get investment expenses under control.  The easiest way to minimize these expenses is by becoming an index fund investor.  Be sure to diversify investments across asset classes.  Burns recommends you begin with “domestic fixed-income, expand to domestic stocks, and then branch out to international stocks, international fixed-income, REITs, energy and emerging markets.”
4. Take just as much time to consider your spending as you do your investing.  Every $1,000 that you save instead of spend adds up to $25,000 in retirement savings.  Easy switches like using generic prescription drugs can put you on the path to spend less.

By taking stock of your spending habits, eliminating your debt, using 401k annuities rollovers to guarantee monthly income for life, and making smart investment decisions; you should be able to obtain the comfortable retirement that we all desire.

“Locking in Future Income” by Leslie Scism of the Wall Street Journal explains both the benefits and drawbacks of variable annuities.  While they help to protect your savings from losses in the stock market, you do need to be aware of both the guarantees and the costs associated with variable annuities.  They are popular because most products offer a guaranteed minimum payment which is paid in a stream over time.  It is important to note that you cannot usually withdraw your money in a lump sum, making variable annuities best for people looking for income like that you’d get from a traditional pension.

Your savings are invested into tax-advantaged funds, whether from 401k annuities transferred into a variable annuity product or from another source.  From there you’ll have an account balance of the basic funds which incorporates both your initial investment and any gains that you have accrued.  You will also have a guaranteed minimum benefit base, which insurers usually re-calculate each year and from which they base your lifetime payments.  While it is hard to find the 10% minimum increases of the past, you can still find 5% or 6% offered for at least 10 years or until your first withdrawal.

The fees associated with variable annuities are usually around 3.5% and can turn some investors off from the products entirely.  It is important to weigh those fees with the benefits though, because sometimes your reward is much more than your costs.  Since the market has extreme highs and lows, many insurers point out that the high increase years more than make up for the fees you are paying and still allow for a significant increase in your base amount.  It is important to speak with a financial adviser about variable annuities, because if you are ready to retire, immediate annuities might be a better product for you.  The Wall Street Journal lists annuityfyi.com as one of the only websites to help investors compare annuity products.