Annuity FYI Blog

While you get a larger annuity payout when interest rates are higher, they are still a good investment choice even in this low annuity rate environment.  In “An annuity can still make sense,” Andrea Coombes of The Wall Street Journal says that this is still a good time for annuity purchases.  An immediate annuity helps to protect you against two major retirement concerns.  The first is that a drop in the stock market will cause you to lose all of your savings and the second is that you will run out of money during your lifetime.

If you haven’t saved enough money to carry you through retirement, an annuity is not going fix that problem.  But an annuity will ensure that the money you have saved, especially that money in your 401k, will last over your lifetime.  The monthly payments you receive will depend on the amount you use to purchase the annuity and many other factors, but it’s like a budget so that you know how much you will have to spend on expenses each month.  Some people choose to add an annuity rider to adjust for inflation or continue death benefits to their heirs in case they die sooner than anticipated.

Variable annuities with guaranteed income might be a better choice for people who want to maintain some control over their money.  With a variable annuity, you get to choose the sub-accounts in which you invest your money through the insurance company.  Make sure to find a lower fee variable annuity because there are some products that charge high fees.  State guaranty associations cover annuities in the case that an insurance company is unable to fulfill their obligations, so make sure that your state covers the entire amount of your annuity purchase.

Written by Rachel Summit

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While 77% of people are happier in retirement than they were when they were working, retirement does face challenges that may be unexpected.  Milwaukee’s Journal Sentinel works on “Addressing the four most common post-retirement challenges.”  Longevity, or the fear of running out of money during your lifetime, is one of the biggest risks in retirement.  As many people live to age 90 and beyond, retirement savings need to stretch farther than ever before.  Health care costs are rising fast and the fact that you need more health care as you age makes this added cost a stressor for many retirees.

Becoming a widow is one retirement challenge that no one wants to think about.  But the reality of the situation is that 75% of married couples have a spouse who spends at least five years as a widow or widower.  The need for long term care of some sort is becoming a bigger challenge for retirees.  Four out of five women and three out of five men will need some type of long term care for a chronic health condition during their lifetime.

There are some solutions to these four major retirement challenges.  Annuity products help to make sure that you do not run out of money in retirement.  The guaranteed income from an annuity can last over a retiree’s lifetime and even include death benefits to last over a spouse’s lifetime.  Purchasing Medicare supplement insurance helps retirees face the increasing health care costs by covering whatever Medicare does not.  Some life insurance policies work in terms to cover long term care.  This long term care insurance is important to help cover the cost of extended care and the life insurance policy helps ensure that a widow is cared for in the tragic death of a spouse.  Insurance against financial doom will help relieve retirement challenges.

Written by Rachel Summit

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In “Why consider an annuity?,” Scott Lunsford writes in the Chillicothe Gazette that there is no better time than now to purchase an annuity.  He says that while some annuities can be complicated, a fear of many people, a fixed annuity is straightforward and offers you a multitude of benefits for your retirement years.  Since you insure your house and car with an insurance company, it is a wise decision to insure some of your retirement savings with one as well.

Fixed annuity rates are currently 3.5% and are guaranteed not to go below 2%, something that can’t be matched by many other savings vehicles.  You also are typically allowed to withdraw up to 10% of your money each year without a penalty and with death benefits, you can avoid the hassle of probate court after death.

Fixed annuities are similar to bank CDs, with the exception that they are most often bought through an insurance company rather than a bank.  Annuities are different in that they are tax-deferred and offer more flexibility than bank CDs and other savings vehicles.  They also have guarantees that last over your lifetime and in some cases, your spouse’s lifetime as well.  The author believes that everyone should at least consider purchasing an annuity, especially because of the volatile stock market and very low interest rates that we are currently experiencing.

Written by Rachel Summit

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In Maria Wood’s LifeHealthPro article “Checking Into Annuities,” the author draws a comparison between the annuity industry and the hotel industry after working in both.  Both annuities and hotels may seem like simple products at first glance, but both have many different options and their industries work hard to cater to the needs of their clients.  For people who didn’t want to pay more money for hotel amenities they didn’t use, hotels started changing their offerings and excluding some items to make rates cheaper.  There is always the option of an expensive hotel with all the amenities for those looking of course.

The annuity industry works hard to to cater to clients’ needs while maintaining their bottom line.  That is what brought about the options of fixed annuities, variable annuities, indexed annuities, and deferred versus immediate annuities.  Some annuities exist that combine long term care insurance or life insurance with an annuity product.  There are many options for funds, riders, and distribution channels when looking into the best immediate annuities and deferred annuities.

Innovation is important in both the annuity industry and the hotel industry.  With hotels, it ensures that everyone can get the exact amenities they want for the price.  The same holds true for annuity products.  If you want to pay more for GLWBs, death benefits, or other annuity riders; that is available to you.  Variable annuities are great for investors who like some risk and can handle stock market ups and downs.  Those looking to take on little to no risk are better suited for indexed annuity products.  Annuities and hotels both try to cater to the clients who use or will use them.

Written by Rachel Summit

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In the U.S. News & World Report article, “Do You Need an Annuity?,” Phil Taylor goes through the benefits of annuity products in retirement.  Annuities came about to ensure that retirees do not outlive their savings.  Because of their low risk, fixed annuities are a conservative investment popular with retirees because of their tax-deferral benefits, exemption from creditors, and avoidance of probate through death benefits.  Their penalty for early withdrawal is usually gone after less than ten years and there is usually no limit to the amount of contributions you can make.

The article describes how you receive monthly income payments from an insurance company in exchange for either a lump sum initial payment or several installments.  The amount you’ll be paid out is predetermined whether the amount paid in is more or less that the payout you’ll get.  The payout options are detailed as follows.  If you choose straight life, you’ll get monthly payments for as you long as you live, but nothing will be passed on to your heirs.  If you choose life with period certain, death benefits will be paid to your heirs to make up for any money you paid into the annuity that has yet to be paid back.  There is also the choice of joint life for you and a spouse or joint life with period certain where your heirs would receive death benefits just like the above mentioned annuity.

With a systematic withdrawal, your payments will be fixed and will come to you either monthly, quarterly, or yearly.  Finally, you can get a lump sum annuity payment at a date in the future.  Fixed annuities are a great option for retirees, especially those who don’t have traditional pensions or multiple sources of monthly income like Social Security.  Speak with an expert for more information and to see if an annuity will work for your retirement.

Written by Rachel Summit

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