Sometimes the stock market can go through a rough patch. The market takes a dive, and then the near-term outlook for stocks might not be that rosy. During those times, many people go on the hunt for ways to keep their money safe.
For millions of Americans, one answer is fixed-type annuities. If you are considering annuities as a place of refuge, then this next question couldn’t be more important for you.
If you had money in a fixed annuity or a fixed index annuity and the market dropped, how much money would you lose? The answer, of course, is not even a cent due to the market falling.
One of the benefits of fixed and index annuities is their guarantee of principal protection. When you put money into a fixed index annuity, the insurance company pledges to keep your money protected from falling index values. The financial safety nets that it maintains to protect your money are indeed very strong.
Even if the market sees a swing like it did in the early 2000s or in 2008, it wouldn’t matter. Your money will stay intact inside your annuity contract. Read More
People buy annuities for many reasons, from market protection to guaranteed income payouts. After all, an annuity is the only instrument capable of paying a guaranteed income for life. But who guarantees annuities? What sort of safeguards stand behind those guarantees?
The annuity guarantor is, of course, the life insurance company issuing the contract.
By law, life insurance companies must maintain very strict capital reserves for every dollar of fixed annuity premium. State regulators require annuity insurers to keep dollar-for-dollar reserves in coverage for every dollar of fixed annuity premium they hold.
Many life insurance companies hold reserves above this. For example, some insurers have $1.08 in reserve capital for every annuity premium dollar.
Hence, this is what financial pundits mean when they say that a life insurer’s ability to make good on their annuity promises depend on that company’s financial strength and claims-paying ability.
What about other safeguards if an insurance company has a liquidity problem? There are also other measures that state insurance regulators put in place as a financial safety net.
Let’s get more into the details of how insurance companies’ financial strength are monitored. We will also cover some of these other safety net features that help back up fixed annuity guarantees to policyholders. Read More
Tune into a financial show on TV or the radio dial, and chances are you have heard it.
The retirement income shortfall among Americans has been a hot topic in the financial advisory community for a long time now. But, surprisingly, what hasn’t received as much attention is the issue of carrying debt into retirement.
It’s a serious matter. More retirees are carrying larger amounts of debt into their non-working years than ever before.. With its rapid pace of growth, this trend is threatening to further disrupt the retirement plans of many seniors.
According to blogger Chris Farrell, the median total consumer debt for retiree-led households (age 65+) was $31,300 in 2016.
That was 250% more than it was in 2001 ($12,250) and nearly 450% more than the level in 1989 ($7,250). Some 60% of senior households carried some of debt, up from 42% in 1992.
Other studies have similar findings. According to one study by researchers at the Ohio State University, among households ages 55-70, some 75% of households had some sort of debt load. That is up from 64% of households in 1989.
As Farrell mentioned on a podcast with NextAvenue: “Over the past ten years — since the financial crisis — one thing that is really striking is how much debt consumers have taken on, particularly in the past couple of years. And people over 60 are increasingly comfortable taking on debt.” Read More
Annuities have become increasingly popular in recent years. While due to many reasons, two big ones are that annuities pay guaranteed income and provide tax-advantaged growth for your money.
The biggest advantage of their guaranteed payouts? Your income stream doesn’t change with political or economic conditions, such as a recession.
The technical definition of an economic recession is two successive quarters of negative economic growth. The National Bureau of Economic Research (NBER) is the body that determines when the U.S. economy is going through a recessionary period.
According to research by NBER and graph data from the Federal Reserve Bank of St. Louis, the United States has been through 17 recessions since 1920. Read More
How is an annuity priced? And why should it matter to you? While you may be exploring an annuity for your retirement, many Americans count on fixed annuity contracts as a safeguard against today’s economic uncertainty.
In many ways, retirees and retirement savers have had a rough go in this ever-changing economic climate. Retired Americans have sought to find choices that pay sufficient regular income for their monthly household needs. Risk-averse savers also have been hit particularly hard, as interest rates still remain near historic lows.
Millions of people have found peace of mind by receiving a lifetime income stream from an annuity contract. This type of payout will guarantee someone a fixed sum of money on a regular basis for as long as he or she lives.
But how can you, the annuitant on the contract, know if you are getting a good deal on the annuity (a fair annuity price) when you buy one for your portfolio? There are several factors that enter into how a life insurance company will price its annuity payouts.
To help you receive the best “bang for your buck,” it’s good to understand how these factors can affect the pricing of annuities by insurance companies — and the impact on the annuity payout you will receive. Read More
Many working-age Americans have at least some idea of when they want to stop working and sail off into the sunset. But sometimes there can be a major gap between what we plan and what actually happens.
For many workers, one such gap is between the age at which they want to retire and the age at which you discover that you have to retire instead. A surprisingly large percentage of American workers are forced into early retirement for a variety of reasons. Those reasons include job termination, layoffs, personal health issues, or a need to care for elderly parents or other relatives.
Of course, early retirement can come with its own financial headaches. You might need to begin taking Social Security early for a reduced benefit. Or you might have to deal with not having enough savings to last for the rest of your life. Whatever the challenges, it’s a period of major adjustment.
Early retirement means that you will have fewer years to save for retirement. You will also have a longer period of time over which you must stretch your money.
What if you plan to work until age 65 or 70? It’s wise to create a financial projection of what your retirement will look like if you had to stop working at age 55 or 60.
And don’t be surprised if you run into some sort of income shortfall. Not everyone is fully prepared to retire early when forced into retirement. So, to be ready for that possible outcome, you might have to make adjustments to your plan accordingly. Read More
Retirement today isn’t the same as your grandparents’ or even your parents’ retirement. It’s a whole new ballgame. Many trends are changing the face and length of retirement as we know it.
Retirees today face the possibility of a much longer retirement lifespan than their predecessors. They also have several issues to contend with that, for the most part, their forebears didn’t have as much pressure to address. What are those issues?
Rising health costs, changing definitions of a traditional retirement, increasing costs of living. And, in the present time, an uncertain global landscape and its economic effects. All of this can make retirement tricky to navigate, let alone to enjoy a financially comfortable lifestyle.
Here are a few retirement trends that are likely to change at some point during your post-career years — and that might affect you in the process: Read More
Annuities can provide retirement savers with many unique benefits: tax-deferred growth, guaranteed lifetime income, guaranteed interest rates, and protection from downside risk, to name a few.
For the most part, the IRS doesn’t have limits on how much money can be placed inside an annuity, giving people more opportunity to take advantage of the contractual guarantees. And if you want more growth potential for your money, fixed annuities and fixed index annuities can earn higher interest while protecting your principal.
However, one limitation that annuities have is their liquidity. Annuity owners give up having complete liquidity in exchange for these benefits, and if their money is in fixed-type annuity contracts, that is a very safe place with the dollar-for-dollar reserves that insurance companies must maintain.
So, are annuities a liquid asset? Yes, they offer some liquidity, but not as much liquidity as you might find in other types of assets in today’s markets. It’s a trade-off for those rock-solid, guaranteed benefits that they provide.
Even so, there are some provisions for liquidity in annuity contracts. You might access your money in a variety of ways: free withdrawals, cumulative free withdrawals, and waivers of surrender charges (where you get your money back in a qualifying situation) are a few.
Let’s talk about the liquidity of annuities in more detail. Read More
One of the chief criticisms of annuities is their relative lack of liquidity. This is true in some respects. Annuity owners give up complete liquidity in exchange for other benefits, including insurer guarantees for lifetime income, guaranteed growth, or protection from downside risk.
Many annuities now come with guaranteed income riders that can be turned off and on while letting you still access at least some principal. And most contracts do offer something called “free withdrawals.” Read More
Not everyone thinks this way, but the idea of ‘living forever’ appeals to many people. Or, at least, the thought of living a longer, healthier life.
There can be many upsides to living longer. Think about how you could share more in the lives of loved ones from younger generations. You would have a front-row seat to see exciting developments in technology and medical services.
You might have the chance to witness new history-making events. At the very least, it would give you the opportunity to see the impact of your lifelong legacy.
Over the past century, life expectancy in the United States rose by over 30 years. It’s no wonder why financial researchers say that people can spend as much as one-third of their lives in retirement nowadays.
Advances in healthcare, medicine, and technology have led to better management of childhood infectious diseases as well as improvements in healthcare for adults’ quality of life. Because of this, people face the prospect of longer retirements and more years that they will have to cover financially than was so in the past.
It’s clear that increasing life expectancy has and will continue to have big effects on retirement. Among other goals, the primary challenge is figuring out how much income you will need to sustain your preferred lifestyle over many years. Read More
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