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Retirement Planning Blog

on 03 July, 2018

what is 1035 exchange

Do you have a current annuity or insurance policy that doesn’t fit your needs well? If you are on the lookout for a new policy, a 1035 exchange may be a worthwhile option.

A 1035 exchange is a section of the U.S. tax code that lets policyholders replace an existing annuity or insurance policy with a new policy – and with no tax consequences. This tax-free exchange may be used for life insurance policies, modified endowment contracts (MECs for short), and non-qualified annuities toward a new policy.

With new waves of innovation available – such as living benefits for terminal illnesses or long-term care situations – you might wish to explore new options. The good news is you don’t have to keep your current policy forever.

Let’s take a closer look at how a 1035 exchange may and may not benefit a policyholder looking for new annuity or insurance choices.

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on 11 June, 2018

fixed index annuity sales q1 2018

Good news for insurance companies and customers who purchase their retirement-income products. In the first quarter of 2018, purchases of fixed index annuities rose 10% when compared with the same period last year. Not only that, overall fixed annuity sales also saw a significant upward swing.

Fixed index annuity sales were $14.2 billion for the first quarter, according to Wink’s Sales & Market Report, a leading resource in the insurance industry for indexed annuity sales. Not only did sales rise year over year, they were also up 4.4% when compared to the previous quarter, Wink reports. Index annuities have a floor of no less than zero percent and limited excess interest that is based in part by the up-or-down movements of an external index, such as Standard and Poor’s 500®.

Another financial research firm, LIMRA, also observes that fixed annuity sales are on the rise. It projects sales of fixed-rate annuities to reach more than $50 billion by 2019. LIMRA calculates that this is close to 50% greater than the $34 billion in purchases of fixed-rate annuities reached last year.

Still, these strong numbers are short of the record—$60 billion plus. That figure was spurred by retirement savers seeking conservative market protection and guaranteed income strategies in the wake of the Great Recession.

Overall, LIMRA forecasts all annuity sales will grow 5%-10% year-over-year in 2018. And they may even rise up up to 5% in 2019. 

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on 20 June, 2018

retirement risks compounded by divorce

According to the American Psychological Association, about 40 to 50 percent of married couples get divorced. While it’s no secret that divorce disrupts lives, it can also threaten a divorcing couple’s financial future, according to new research.

The Center for Retirement Research at Boston College (CRR), with the support of Prudential Financial, just released a study. Their findings? Divorced Americans are at greater risk of not being able to maintain their standard of living in retirement. 

The study compared the risk divorced households face using the center’s National Retirement Risk Index (NRRI). It revealed divorced households have a 7-percentage-point greater risk of not having adequate retirement income than households not experiencing divorce. Among all households, exactly half are at risk of not having adequate retirement income.

"Millions of American households are at risk for not having adequate retirement income, and the challenge is even more acute among divorcees," said Kent Sluyter, president of Prudential Annuities. "These are sobering numbers that highlight a fundamental shift that needs to take place in the way we think about retirement. Instead of solely thinking about accumulating savings, people also need to consider a plan for protecting and generating retirement income."

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in Annuity
on 04 June, 2018

annuities in employer retirement plans

The American workplace has seen remarkable advancements over the past 20 years. From technology that has revolutionized the way we work, to the physical environments we work in, to the changing workplace conditions, almost every facet of the American workplace has been modernized. Every facet, it turns out, except, perhaps, the workplace retirement plan.

But American workers may soon benefit from new options within their retirement plans, thanks to several bipartisan bills. The pieces of legislation are currently under review by a congressional subcommittee, and they are designed to update the Employee Retirement Income Security Act (ERISA).

"Many ERISA provisions related to retirement plan administration are in desperate need of updating, with some having last been revised over two decades ago," according to Rep. Tim Walberg, chairman of the Subcommittee on Health, Employment, Labor and Pensions.

Walberg voiced this opinion during a recent hearing on "Enhancing Retirement Security: Examining Proposals to Simplify and Modernize Retirement Plan Administration."

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on 19 June, 2018

whats happening to social security medicare

If you are gearing up for retirement, chances are you have seen the headlines. Earlier this June, the trustees of Social Security and Medicare published their annual reviews of both programs. And, at first glance, their news isn’t good.

The trustees acknowledged the programs face funding challenges. But that is a far cry from them being completely emptied. Even so, it wasn’t long before the Internet was flooded with alarmist headlines on the outlooks for Medicare and Social Security. As we will see in a bit, even some prominent news organizations had a few of the critical details wrong.

Like many people, you may have thought at some point: “Will Medicare and Social Security be there when I retire?” It’s a legitimate question, especially considering how you have paid into these program funds for your entire working life.

Let’s try to get to the bottom of these worries—and clear up some confusion—by consulting the latest research and findings on the one issue that affects every American who plans to retire one day.   

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on 01 June, 2018

long term care planning why you cant ignore it

Long-term care planning (or LTC planning for short) isn’t perhaps the most exciting topic. But most people can’t afford to ignore it in retirement. In one of its bulletins, AARP observes "by the time you reach 65, chances are about 50-50 that you will require paid long-term care someday."

For Christine Benz, Director of Personal Finance for Morningstar, it’s the four-ton elephant in the room. "Long-term care is the unsolved problem for so many people," she told AARP. And probability of use might not be the only reason why. There’s also the hefty price tag to consider.

For years, Genworth has tracked the monthly national median costs of various long-term care services in its "Cost of Care Survey." Those nationwide costs swelled by double-digit percentages from 2009 to 2017, with some LTC services seeing a 30+% cost increase.

"What about state to state?" you may ask. Let’s look at the median expense for a common LTC need, nursing home care, and its cost depends on where you live. In 2017, the cheapest state for a semi-private room in a nursing home was Texas at $4,567 per month, while Connecticut was the most expensive state at $12,517 per month.

Here's another clincher to think about -- that is without factoring the cost impact of other healthcare needs in retirement as well!

AARP long term care planning

Source: AARP, Nicholas Rapp, AARP Bulletin, 5 Things You Should Know About Long-Term Care Insurance, Article Link. All Rights Reserved.

Knowledge is foresight, so it pays to understand the basics of long-term care and what it can entail for retirement planning purposes.

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on 12 June, 2018

retirement planning for divorced spouses

Divorce can be one of life’s most challenging experiences. Not only is it distressing, but it also brings financial upheaval. And depending on your age, divorce may pose yet another risk: taking what was an on-track retirement plan squarely off balance.

For people in their 50s and up, the challenges are particularly acute. There will be less time to make up for what you will have lost. You will have a shorter timespan to gather earnings, put away savings, and accumulate more wealth from portfolio investment growth. Your goals and plan for retirement will also change, since you likely counted on a financial future with your partner.    

Later-in-life breakups are a growing trend, as researchers at Bowling Green State University discovered. They found that, from 1990 to 2010, the divorce rate among couples in their 50s and beyond more than doubled. In that same period, the overall divorce rate remained relatively flat.

While it may be tempting to put finances on the back-burner, now isn’t optimal to fall back on planning ahead. Your financial security is at stake. If anything, it’s time to refocus on your financial progress and create a new plan for your personal retirement goals.

Here are some tips to help you get back into the driver’s seat of your money matters.

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on 30 May, 2018

claiming social security early

For many soon-to-retire households, the timing of when to take Social Security benefits is an important choice. David Freitag, a Social Security expert with Mass Mutual, says that if you calculate the present value of a couple’s monthly benefits, it could exceed $1 million.

People are living longer and spending more. As a result, they need to know how their benefits really work, according to Freitag.

And it’s largely due to longevity risk, as the head of MassMutual in the U.S. explains: “This is not a retirement planning conversation. This is a longevity planning conversation, and near-retirees have the power and responsibility to ensure that they protect and receive every dollar they deserve in Social Security retirement benefits when the time comes.”

Even so, a large number of people take Social Security benefits before their full retirement age. In doing so, they may begin receiving income from Social Security sooner. But there are trade-offs, which vary depending on just how early you start benefits.

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on 14 June, 2018

wealth protection strategies volatility article

In the last three years, Americans have reported they have become more accustomed to market volatility. But a lingering anxiety over this market uncertainty has led them to seek, in record numbers, strategies to protect a portion of their retirement savings.

This latest snapshot of Americans’ attitudes toward market volatility, and its effect on their retirement planning, comes from Allianz Life’s 2018 Market Perceptions Study.

Conducted this April, the online study surveyed a nationally representative sample of more than 1,000 respondents. Of this population, more than half had investable assets above $200,000.

Chief among the findings? A growing number of Americans said they are comfortable with market conditions and are ready to invest. That share of people was 35% in the 2018 study, compared to 26% in a similar Allianz study published in 2015.

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on 24 May, 2018

strategies to help bridge retirement income gap

The mantra for success in real estate is "location, location, location." For success in retirement, the canned phrase becomes "income, income, income."

 When you retire, you no longer have a salary from full-time employment. Or maybe you were an entrepreneur, so you brought home the bacon in other ways, such as business ownership. Either way, your income situation will probably change.

A key factor for living well is how much money you can expect to receive every month from your own unique mix of retirement income sources. However, some Americans may fall short of the income they need for their golden years. Consider research done by the Employee Benefit Research Institute, for instance.

In one study, center researchers found that as many as 40% of baby boomers in the study may run out of money in retirement. According to the Employee Benefit Research Institute’s Retirement Readiness Ratings, released in 2014, only 56.7% of “early” baby boomers (born from 1948 to 1954) and 58.5% of late boomers (1955 to 1964) will have the financial resources required to meet their retirement expenses. The remaining retirees would struggle with income that falls short of their needs.

The EBRI’s model indicates that a household is considered likely to run short of money if its assets can’t meet "minimum retirement expenditures." This is a combination of expenses from the federal Consumer Expenditure Survey (as a function of age and income); some health insurance and out-of-pocket health expenses; and expenses from nursing-home and home-health care.

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