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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The short answer? Immediate annuities actually don’t come with an accumulation period. Once you have paid premium into the contract – in most cases a one-time lump – the insurance carrier will start income payments nearly right away. Your income payouts may start anywhere from 1-12 months after the premium payment date.
When this starting date is depends on your contract and frequency of payments. You may receive income on a monthly, quarterly, or even annual basis. Many contract holders opt for a monthly payment schedule.
The insurance carrier puts the entire sum of your premium into a pool of other premiums it has been paid. Then it allocates these premiums into conservative, low-risk investments. In return, the carrier pledges to make payments to you – or someone you specify – for a specified period of time, which can be for the rest of your life. The income you receive includes a fixed sum and interest paid on a continual basis.
Therefore, immediate annuities don’t have an accumulation period – there is little time between when you pay premium and start receiving income. Many immediate annuity contracts start income payments just a month after the day you bought your annuity.
Where accumulation periods do apply is with deferred annuities. In these contracts, your money will be left alone for a number of years before you start taking income. Let’s get into more details below. Read More
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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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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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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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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Early on, your retirement planning was probably focused on accumulating savings and growing your money. You aimed to invest and to enjoy solid returns for your money, perhaps with an advisor’s help.
However, things change as we get closer to retirement. Now, it’s more important to protect the money you have put away over the years. And once you retire, you will use this nest egg to replace the income stream you received during your career. Whether it was from a job, entrepreneurship, or other programs, that income source will change in some way.
A well-thought-out retirement income planning strategy can make a difference in helping you enjoy a comfortable lifestyle. This quick and in-depth guide will lay the groundwork for helping you create an effective income plan.
Keep these retirement income planning tips in mind as you start planning for how you will have financial security for many years ahead. Here are a few things to know and do in order to increase your chances of a secure, fulfilling retirement.
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When you are in the later stages of your career, retirement might be the furthest thing on your mind. It’s no wonder, as many other financial priorities are likely competing for your time and attention.
At this point, many people are thinking about how they will help their kids pay for college. For others, it’s about assisting their aging parents with costly health expenses. Or perhaps paying off debt is top of mind.
But retirement can creep up quickly. For some folks, it can be sooner than they think, whether via a forced early retirement or a layoff that makes it hard to find another job. Read More
Are you at or near the point of needing principal protection? Not everyone has the same psychology of investing, but many people start tapping the brakes on their tolerance for risk as they near retirement. While financial markets had some history-making moments in the 2000s, they saw never-before-swings in 2020, as an example.
Because of the economic and financial disruptions from the novel coronavirus, and resulting investor fears, the stock market had wild swings happen just in a matter of days. Beforehand, it had taken weeks or months to see such market volatility.
Such uncertainty was tough for retirees and for those who are just on the cusp of retirement. According to Pew Research, 10,000 baby boomers reach age 65 each day. That is a trend that started in 2011, and that Pew expects to go on until 2029.
In other words, this uncharted territory can have a lot at stake. If you are nearing retirement, you may be wondering about your own financial future. Perhaps you are thinking about whether you should have some principal protection for some of your retirement money? Read More
Many know Ken Fisher as the Chairman of Fisher Investments, but you might recognize more from his ‘I Hate Annuities’ campaigns. From attention-grabbing TV commercials to spirited digital ads, Fisher hardly runs from controversy.
“I would rather die and go to hell than sell an annuity,” he famously declares in one commercial. But does Fisher really hate annuities this much? More importantly, should you write off annuities for your retirement because of his criticisms of them?
Fisher Investments, a registered investment advisory firm, operates an annuity buyout program. In exchange for investors becoming clients of his firm, Fisher Investments will pay the surrender charges on the variable annuities which the investors are leaving. Read More
