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Retirement Planning Blog

in Annuity
on 22 September, 2021

how does an indexed annuity differ from a variable annuity

In past decades, more people have been buying annuities. A big part of this is due to the unique features that annuities offer, such as tax-advantaged growth and contractual guarantees such as lifetime income.

Of course, many kinds of annuities are available now. Knowing what annuity is right for your situation (if indeed a good fit) can be a challenge in some cases.

If you are looking for growth, then you might look at fixed index annuities or variable annuities, as they both offer more growth potential than traditional fixed-type annuities.

But to make a confident and well-informed decision here, it helps to know how these types of annuities are alike and how they differ.

At their core, both are contracts with a life insurance company for a certain period. Where their differences lie is how their money grows, their exposure to market risk, and the fees that they carry, among other things.

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on 18 August, 2021

how deferred retirement option plans work

Are you a public employee and close to retirement age? If you prefer to not ‘separate from service’ quite yet, opting for a DROP retirement program can be worthwhile.

Depending on your employer, DROP is short for “deferred retirement option program” or “deferred retirement option plan.” DROP plans first came about in the 1980s for public-sector employees. Currently, members of law enforcement, firefighters, educators, and other civil employees often have this sort of program as an option for delayed retirement.

You have probably heard of some of the many states that offer a DROP program, including Florida, Ohio, Texas, and California. Of course, state governments aren’t the only ones with DROP programs. Municipal governments also offer DROP retirement options to their employees.

DROP benefits can be a great boon to employees who would otherwise prefer to keep working and not quite settle into retirement. If you do have this option as part of your retirement benefits, it’s a good idea to look more into it and see if it might make sense for your working goals.

Are you unsure about whether your retirement system has a DROP option? You can check with your HR department for more information.

All of that said, here is a quick rundown of what deferred retirement option plans involve and what sort of benefits you might obtain from it as a long-term civil employee.

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in Annuity
on 15 September, 2021

what is qualified longevity annuity contract qlac

If you have spent some time exploring your options for retirement planning, you might have heard of a qualified longevity annuity contract, or QLAC for short. But what is a QLAC? What are some reasons that folks might consider this option for their situations?

As everyone knows, people tend to have many financial concerns nowadays. Having enough retirement income is a top concern among those who have stepped back from a full-time career. Among other things, low interest rates have made it harder to generate predictable income for even just run-of-the-mill living expenses in retirement.

With low rates hitting fixed-interest options such as CDs, Treasury securities, and bonds, the challenge is figuring out how to adequately supplement other sources of predictable income, such as Social Security or a pension. No wonder, then, that surveys have found that many retirees are afraid that they might run out of money in their later years.

Since they have a monopoly on paying reliable lifetime income, annuities are one vehicle that can help fill this gap. In fact, besides Social Security, annuities are the only thing on the planet capable of paying you a guaranteed income for life.

Challenges Still Linger

But even the income from an annuity may not be enough to cover a retiree's expenses when they get into their final years, especially if they need services such as long-term care or home healthcare.

Conversely, many retirees won’t need to start taking money from their IRAs or workplace retirement plans when they turn 72 (the new age at which required minimum distributions must start). RMDs can create a tax headache for those with considerable retirement assets, and they may be an excess source of income in some cases.

Enter again a possible solution with QLACs, which can help with providing income in later years or providing some tax relief for a while regarding required minimum distributions.

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on 11 August, 2021

fixed index annuity pros and cons

Thinking about a fixed indexed annuity for your retirement? When considering a fixed index annuity, or any annuity contract for that matter, it’s helpful to think through all the pros and cons of your options before making a decision.

Nothing is perfect for every financial situation or contingency. Fixed index annuities are no exception in that regard. Rather, a strategic mix of financial vehicles and strategies will help create a balanced, personal retirement plan that fits your needs and situation.

A fixed index annuity can give your plan a strong foundation with its contractual guarantees. Your money can grow more in an indexed annuity than it might in other fixed-type annuities with guaranteed rates. However, this kind of annuity has some areas where it’s not as strong as other annuities or financial vehicles are.

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in Annuity
on 09 September, 2021

are annuities a good investment for retirement

Could annuities be a good investment for retirement? If you could have more peace of mind or your plan could be stronger from having contractual guarantees in it, such as guaranteed income for life, then it’s good to consider an annuity.

What about saving for retirement? If you are taking advantage of contributions to retirement accounts, then annuities can provide another tax-advantaged vehicle for you to build up even more retirement savings. These are just a few ways that an annuity might help you in your financial goals.

One Important Clarification

All of that being said, let’s go back to the original question: “Are annuities a good investment for retirees?” To delve fully into that, it’s important to be clear about what annuities are.

By definition, an annuity is a contract with an insurance company. In exchange for someone putting money into the annuity contract, the insurance carrier promises to uphold contractual guarantees over a certain time. This might be a contractual guarantee to pay you a lifetime income stream, for example.

Because of this use as a contract, many annuities aren’t technically an investment. Fixed-type annuities such as fixed annuities, multi-year guarantee annuities, and fixed index annuities are really fixed insurance contracts. In this regard, they are more of a risk-managing tool.

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on 05 August, 2021

using life insurance for tax free income

People have a variety of accounts that they can use to save for retirement. You might have heard of some of them before. IRAs, 401(k)s, 403(b)s, and 457(b) accounts allow workers to put away money on a pre-tax basis and then take it out in retirement as taxable income.

What if you are worried about taxes? Then you can opt for a Roth account, in which you put away money on which you have already paid income taxes. The benefit is on the backend, where you can draw it out tax-free in retirement.

The good news is there are other ways that you can have even more tax-free income in retirement. These options can be a good supplement to a Roth account. So long as it’s properly structured and used correctly, an indexed universal life insurance policy can be one such vehicle. An IUL policy lets you build cash value by putting in premiums with after-tax money, then later take out money tax-free.

What’s more, policyholders also have a complete package of insurance benefits on top of their retirement income. Many IUL policies today provide living benefits for critical illness, chronic illness, and terminal illness. These benefits let you use proceeds to cover costly expenses in those health situations.

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on 02 September, 2021

how will you draw income in retirement

Whether you bring home a paycheck or earn your keep from entrepreneurship, everyone has some primary income sources during their career. But things change in retirement.

Some folks continue to work in some fashion, often for their own enjoyment. However, chances are you won’t count on this same income source in the way that you did during your career. You may well have to find a way to replace this income with other income streams.

This brings up a big question: How will you draw income for your retirement spending needs?

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in 403(b)
on 28 July, 2021

how does 403b work when you retire

You have worked hard for years, but you may be uncertain about what to do with your 403(b) after you leave your job. If you are at or near retirement and you have been saving money in your 403(b) plan during that time, you can have several options.

Retirement is a major life milestone, and knowing the paths that you can take with your retirement savings can have a big impact on the quality of life you can enjoy after you stop working. Here is a breakdown of the different choices of what you can do with your 403(b) after you have left a full-time career, and how each of these options work.

As you go over your 403(b) retirement options, a good thing to think about is how, in retirement, you will replace the income that you brought home from your career. Your retirement savings inside your 403(b), and probably money inside other accounts, will come into play here.

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on 25 August, 2021

how retirement differs for generations

Every generation faces different obstacles for retirement. But if you were to tune into any financial talk show today, you might hear the host say that retirement isn’t even close to how it was for your parents and grandparents. Why?

Nowadays, people have a variety of issues that are different in scope or that weren’t even around for prior generations. Never-before-seen economic conditions (such as those tied to the COVID-19 pandemic), lengthened lifespans, and evolving financial risks are all contributors to this.

What’s more, the definition of retirement has changed. Nowadays, retirees are taking their golden years by the horns. They are enjoying full lives of second career acts, budding entrepreneurship, volunteerism, and pursuit of lifestyles that might have not been possible for their parents or grandparents.

Here's a look at why retirement is different for people today than it was in the past -- and how you personally can be ready for the changes.

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in Annuity
on 23 July, 2021

annuity period certain

When it comes to annuities, have you ever heard of “period certain” payouts or other confusing terms? Many people use annuities for guaranteed income streams. It’s helpful to know what these terms might mean if you are thinking about an annuity for your retirement.

One of the great things about annuity contracts is how they can be structured to fit different situations. Do you want guaranteed monthly income for the rest of your life? The insurance company will pay you like clockwork, even if all of the money in your contract runs out and it’s still paying you decades later.

Or what if you want the guaranteed income to last for only a certain period? Then you have some flexibility in how long you choose to receive those payments. With help from your financial professional, you can explore different annuity payout options and see what makes sense for your needs.

Of course, some people worry about not being able to enjoy these guaranteed annuity payouts for as long as they might wish. What if something major happened and they passed away sooner in retirement than expected? They wouldn’t have a full return of the money that they had paid into the contract.

The good news is someone can choose payout options that continue payments to their loved ones should they pass away in this manner.

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