Retirement Planning Blog

How Do Fixed Index Annuities Let You Beat the Bank?


When economic and market conditions seem uncertain, it’s natural for people to look for places to protect their money from losses. Some places are pretty low risk and let your money earn interest. You can find many of these options at banks: certificates of deposit, savings accounts, money market accounts, and high-yield savings and checking accounts, to name a few.

If you are looking to park retirement money somewhere, a fixed index annuity may also be an option to explore. A fixed index annuity shields your money from losses due to market declines. It gives limited opportunity to earn interest based on a market index’s performance. That being said, in exchange for the guaranteed protection of your money, that growth potential is limited.

Bank products will grow your money with interest over time, and they are backed by FDIC coverage. You can also use bank accounts as a source of liquidity for your money. But over time, a fixed index annuity can let you “beat the bank” with its potential for index-linked interest earnings. If you plan to use that money for retirement, the annuity can also pay you a guaranteed income stream for as long as you need it.

In this article, we will go over more on fixed index annuities, their potential for “beating the bank,” and some pros and cons for each option that are good to keep in mind.

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Do Fixed Annuities Have Fees?


Are you thinking about an annuity for some of your retirement savings? Are you worried about fees? The good news is that many annuities don’t have fees, but it also depends on the annuity type you are talking about. There are five kinds: variable, immediate, fixed, multi-year guarantee, and fixed index annuities.

Variable annuities offer the most growth potential, but they also have the risk of market losses and tend to be fee heavy. The other four kinds fall into the fixed column.

Fixed annuities and multi-year guarantee annuities have guaranteed rates for a set period. Fixed index annuities can earn interest based on a market index’s performance, but the growth potential is limited. Immediate annuities start paying you income right away, while with these other fixed-type annuities you usually start income payments some years down the road.

Let’s go back to our overall fixed annuity focus. Most fixed annuities don’t have fees. Fixed index annuities don’t have upfront fees, but some add-ons to a base contract may have fees. It depends on whether you would like those add-on benefits on top of what a base contract gives you.

What about surrender charges and things like that? All annuities are long-term vehicles, and they have maturity periods. If you wish to take advantage of the benefits, then keep your money in the annuity until it matures. Otherwise, there might be a surrender charge. It’s a way for the insurance company to manage risk and keep its promises to you and many other customers.

In this article, we will go over why fixed annuities don’t have fees and how they work.

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The Three Phases of Retirement: How You Can Be Ready Financially


Does your financial plan cover the three phases of retirement? Once you have retired, it’s quite different from your career years. Now is the time to live off the fruits of your work and enjoy life on your own terms. You don’t want to leave your retirement lifestyle up to guesswork or chance. Your plan should make you confident that you will be able to retire well and then stay retired.

All of that said, retirement is a moving target, and it comes with distinct phases. These phases of retirement are:

  • The go-go years
  • The slow-go years
  • The no-go years

The go-go years are when retirees are in good health and able to do what they enjoy. That can be travel or physical activities such as pickleball or golf. The slow-go years are when retirees can still pursue those activities, but their level of involvement slows down a bit. Finally, the no-go years are when retirees have aged and their health has changed. They tend to need more long-term care support and other healthcare supports at this stage.

It’s hard to estimate how long each phase of retirement might last. That will depend on a retiree’s personal health, family history, history of taking care of himself or herself, and more. In this article, we will go over these three phases of retirement, what they might look like for how you spend your money and time, and things to keep in mind as you plan ahead.

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6 Retirement Rules of Thumb to Keep You on the Financial Fast Track


Financially speaking, are you on track for retirement? Can you do more to reach your goals? These questions matter, and certain retirement rules of thumb can help you see where you are. But first, what is a retirement rule of thumb, and how does it work?

Quick sum-up. A rule of thumb is a general principle to help you make money decisions. For example, the Rule of 100 is a guideline for balancing risk in your asset holdings. We will discuss it more later, but you take your age and subtract it from 100 for an idea of what percentage of your portfolio might be in growth-oriented assets, such as stocks.

Building on that concept, a retirement rule of thumb is a quick way for assessing your progress in retirement planning. In this article, we will go over six retirement rules of thumb that you can use in different ways, including:

  • If you are saving enough for retirement
  • How fast your retirement savings might grow
  • How inflation can affect your income in retirement
  • How much retirement money you might need

Again, these retirement rules of thumb are meant only as a starting point, like on a map. Your financial destination is your own, and a custom-tailored plan will help you get there.

When you are ready, an experienced financial professional can discuss your situation and come up with a personalized plan just for you.

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Are Annuity Surrender Charges Good or Bad?


Are annuity surrender charges a good or bad thing? If you want a predictable income steam in retirement, only annuities can provide you with guaranteed payments for life or for a set period. No other financial product can truly do this.

On the other hand, a surrender charge can be a hold-up for someone who might otherwise be interested in an annuity for its guaranteed benefits. Annuities are contracts between someone and a life insurance company.

They are a long-term commitment, and if someone wanted to take out more money than is permitted or exit the contract prematurely, a surrender charge would apply. Of course, surrender charges also help insurance companies maintain their long-term promises to policyholders as well.

So, are annuity surrender charges good, bad, or indifferent? How do they work, and in what specific ways do they work for you? Are there other upsides to annuity surrender charges beyond the obvious benefit of helping the life insurance company?

The truth is, they are more of a necessary feature than a judgment of goodness or badness. In some respects, you can say they are a neutral thing. Let’s break them down into some simpler terms.

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Is Dave Ramsey’s 8% Withdrawal Rate Valid?


Dave Ramsey is well known in the personal finance space, but at times he gives bad money advice. Sometimes his financial advice is, frankly, out of touch with reality. Such was the case on one of his November 2023 broadcasts, when he served up some bad math on retirement withdrawal rates that would virtually guarantee people will run out of money.

During the show, Dave Ramsey said that retirees could safely withdraw 8% from their portfolios each year and never touch their principal. That is assuming that you see 12% returns per year, have 100% of your assets invested in “good mutual funds,” and keep 4% in your portfolio for inflation. Inflation has averaged 4% for the last 80 years, according to Ramsey.

Apart from unrealistic numbers, the real downside is how Ramsey completely overlooks the danger of sequence of returns risk. What is sequence of returns risk? It’s the possibility of suffering investment losses during a crucial period: in the years just before or in early retirement.

During retirement, you will count on your assets to generate income for you. Average returns don’t matter, but rather the order of your returns. If your assets take a hit in the time just before or early into when you are retired, your window for recovery isn’t what it was during your working years.

Even worse, what if you are withdrawing money during a down year? Your investments will have compounding losses – whatever initial drop they had, snowballed by the money you took out of your account.

In this article, we will go over why Dave Ramsey is completely wrong on his 8% withdrawal rate rule – and why other retirement withdrawal rates, and withdrawal strategies for that matter, might be worth a look for lasting financial security.

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Annuity Pros and Cons for Secure Retirement Income


Annuities are gaining prominence as a key element in retirement planning, offering potential solutions for those seeking a reliable income stream after they stop working. Everyone is scared to run out of money after retirement, therefore, to make informed decisions aligned with long-term financial goals, it’s crucial to understand the diverse types of annuities available. Let’s explore annuity pros and cons, detailing the various options like immediate, fixed, variable, and indexed annuities, to help you determine if an annuity is the right fit for your retirement savings. By examining the advantages and disadvantages of each type, you’ll gain a comprehensive understanding of how annuities can either bolster or hinder your retirement plans.

What Is an Annuity? A Primer on Retirement Income Options

An annuity is a financial product sold by insurance companies that guarantees a regular income stream for a period of time, possibly for the lifetime of the annuitant. This product plays a crucial role in retirement planning, providing a sense of security via steady cash flows. There are various forms of annuities; the primary types are immediate, fixed, and variable. An immediate annuity starts payments almost after purchase, while a deferred annuity accumulates interest, beginning payouts at a future date. A choice between fixed, variable, and indexed annuities offers either a guaranteed return or returns tied to market performance.

Annuity Types Explained

Immediate Annuities

Immediate annuities are ideal for retirees who need a guaranteed income soon after investing. This type involves a lump sum payment to an insurance company, which in turn provides a series of payments that start almost immediately and continue for the agreed term or for the annuitant’s lifetime.

Deferred Annuities

Deferred annuities allow the investment to grow before income payments begin. This can be particularly beneficial for individuals who are still in the workforce and planning for future income.

Fixed Annuities and MYGAs

Fixed annuities offer a guaranteed interest rate and are often subsequent investments for retirees who prioritize safety over high returns. Multi-Year Guaranteed Annuities (MYGAs), a subtype of fixed annuities, provide a fixed rate for several years, ideal for those seeking predictable returns.

Variable Annuities

Variable annuities provide an income based on the performance of underlying investments, typically mutual funds. While they offer higher growth potential, they also come with increased risk, depending on market conditions.

Fixed Index Annuities

Combining the features of fixed and variable annuities, Fixed Index Annuities (FIAs) protect the principal like a fixed annuity but earn interest based on the performance of an external index, subject to a cap on maximum returns. This type can be ideal for someone seeking stability, coupled with a moderate growth opportunity.

Read on as we explore annuity pros and cons in their entirety in the next sections.

The Pros of Annuities for Retirement Security

Steady Income Stream

One of the most significant advantages of annuities is their ability to provide a steady, predictable income stream, much akin to Social Security benefits. Once invested, annuities can offer guaranteed payouts either immediately or at a specified future date, depending on the type of annuity chosen. This ensures that retirees have a consistent income despite fluctuations in the market or other income sources.

Longevity Risk Protection

Longevity risk, or the possibility of outliving your savings, is a substantial concern for many retirees. Annuities act as a hedge against this risk by offering options for lifetime payments, ensuring that individuals have a financial safety net that endures throughout their retirement years.

Market Risk Mitigation

Particularly during the ‘retirement risk zone‘—the period just before and after retirement—market volatility can substantially impact one’s savings. Annuities, specifically fixed and indexed types, provide principal protection that shields retirees from downturns in the market, safeguarding their essential retirement funds.

Flexible Payout Options

Annuities come with a variety of payout options, allowing individuals to tailor their income based on their specific retirement needs. Whether it’s opting for a lump sum, periodic installments, or a combination, this flexibility helps manage financial planning more effectively.

The Cons of Annuities: Understanding the Trade-Offs

Product Complexity

Annuities are often criticized for their complexity. Each annuity product comes with different features, fees, and contingencies that can confuse even the most knowledgeable investors. Understanding these complex contracts and additional riders necessitates thorough research or a knowledgeable financial advisor.

Liquidity Concerns

Liquidity, or the ease of accessing funds, is less flexible in annuities compared to other financial products like mutual funds or stocks. Many annuities impose withdrawal penalties or surrender charges during the early years of the contract, restricting access to funds in case of an unexpected financial need.

Fees and Expenses in Annuities

The costs associated with annuities can be high, particularly with variable and fixed-indexed annuities that come loaded with management fees, mortality and expense risk charges, and other administrative expenses. These fees can erode the potential gains of an investment, making it crucial for buyers to understand fee structures before committing to an annuity.

Annuity Riders and Their Additional Costs

Annuity contracts can be customized with optional features called riders, which enhance the contract’s benefits but come with additional costs. This is an important factor to consider when weighing annuity pros and cons. Common riders include:

  • Death Benefit Rider: Ensures beneficiaries receive a specified amount if the annuitant dies before receiving the full financial benefits.
  • Living Benefit Riders: Guarantee a minimum income regardless of how the underlying investments perform.
  • Long-Term Care Riders: Allow penalty-free withdrawals if the annuitant requires long-term care.

While these riders can provide valuable protection and peace of mind, they also increase the overall cost of the annuity. It’s essential to carefully assess your needs and financial situation to determine whether the added benefits outweigh the additional expenses. Consulting a financial professional can help you navigate these choices and make informed decisions about which riders, if any, are appropriate for your individual annuity contract.

Assessing Annuity Costs: Fees to Consider

Understanding all associated fees is crucial when purchasing an annuity. Administrative fees cover the insurance company’s costs of maintaining accounts, while mortality and expense risk charges compensate the insurer for underwriting the contract. Variable annuities may have additional investment management fees linked to the performance of underlying funds. Prospective buyers should also scrutinize any rider fees for added services. These fees vary from one annuity to another and can significantly impact the effective returns, making transparency in pricing and a thorough cost comparison essential steps in selecting the right annuity for your retirement needs.

Making the Decision: Is an Annuity Right for Your Retirement Plan?

Deciding whether an annuity fits into your retirement landscape necessitates a holistic evaluation of your financial situation, goals, and the trade-offs you’re willing to accept. Start by assessing your retirement income needs against expected income from Social Security, pensions, and any savings or investments. If there’s a gap, an annuity might be a strategic tool to ensure a guaranteed income stream that covers your essential expenses.

Consider your tolerance for risk and complexity. If you prefer a straightforward, guaranteed income with minimal exposure to market volatility, fixed or indexed annuities could align with your preferences. Conversely, if you’re comfortable navigating the market’s ups and downs in exchange for potentially higher returns, a variable annuity might be worth exploring.

Liquidity is another critical factor. If you anticipate needing access to your funds in the early years of retirement for unforeseen expenses, the potential surrender charges associated with annuities may be a deterrent. Reflecting on your health and longevity expectations is also vital; annuities make the most financial sense for individuals expecting to outlive their other retirement savings.

Lastly, it’s paramount to consult with a financial advisor to navigate the complexities of annuities. Their expertise can help you understand the nuances of various products, ensuring your choice fits seamlessly into your broader retirement strategy. Remember, an annuity is not merely an investment but a commitment to your future financial security, deserving careful thought and planning.

Some Final Thoughts on Annuity Pros and Cons

Utilizing an annuity for retirement income can offer substantial benefits. In fact, annuities stand alone as the only financial product capable of providing a guaranteed income stream throughout your lifetime, offering unparalleled peace of mind.

However, like any financial tool, annuities come with their own set of annuity pros and cons. The key lies in integrating an annuity strategically into your broader retirement income plan, ensuring it addresses a specific income gap or financial challenge within your existing strategy.

As you weigh the annuity pros and cons, it’s crucial to tailor your annuity choice to your unique financial situation and retirement aspirations. Consulting an experienced and independent financial professional with expertise in retirement planning and annuities can be invaluable. They can guide you through various options, identify annuities that align with your needs, and ultimately determine the most suitable solution for your retirement goals, ensuring a stable and fulfilling retirement journey.

Looking for an independent financial professional to guide you? offers a network of experienced professionals ready to assist. You can easily connect with one by visiting our “Find a Financial Professional” section and schedule a free appointment. Alternatively, call us at 877.476.9723 for a personalized referral.

6 Retirement Withdrawal Strategies to Maximize Your Income


How can you make the most of your income in retirement? People are living longer, and that adds up to more years of spending that they need to plan for. To ensure your money lasts as long as you need it, you might explore these different retirement withdrawal strategies to see if any might be right for you.

These retirement withdrawal strategies vary in their approach and flexibility. Sometimes a withdrawal strategy may work well in certain economic and market conditions than in others. For example, one withdrawal strategy uses a percentage-based rule, which works well when investment markets are posting gains and retirement investments rising in value.

Over your career, you may have built up funds in your 401(k) (or another workplace retirement plan). In retirement, the matter of deciding how to manage savings largely falls on our shoulders. What makes this even trickier is that investing for retirement is completely different from retirement income planning. In that case, you have to figure out how to turn your nest egg into reliable income that lasts for the rest of your lifetime.

Use these retirement withdrawal strategies as a starting point in your income planning. By seeing each one’s upsides and downsides, you can see how you can make the most of your money for as long as you need it.
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Retirement Plan Review: How and When to Evaluate Your Plan


Do you have a retirement plan set for your financial future? How often should you review your retirement plan in case you might need to adjust anything? Life changes or other things outside of our control can take our financial journey in a new direction. Your retirement plan should let you be able to pivot and change course as such things happen.

It’s good to have routine reviews of all aspects of your retirement plan so that you stay on point. Life is dynamic, and those unexpected events can otherwise have a big impact on your financial well-being. If your retirement plan is still on track, that is good news. If it isn’t, your financial professional can help you make corrections that steer you back in the right direction.

Since retirement planning is a moving target, we will go over a few things to keep in mind for your retirement plan review meetings in this article. That will include how often to review your plan, how to evaluate your plan, and when re-evaluation might be a good idea. Whether you are starting to plan for retirement in mid-career or you want to make sure that your current plan is on the right path, this guide will help you evaluate your financial progress.

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Social Security Benefits COLA 2024: What to Know


The word is out about the Social Security cost of living adjustment (COLA) for 2024! The Social Security Administration has officially said what next year’s COLA will be.

In 2024, Social Security beneficiaries will get a 3.2% raise in their benefits. While it’s not as big as the 2023 COLA of 8.7%, it’s still quite a lot. This is good news for retirees and others receiving Social Security payments for a few reasons.

One, because it means their payments will be higher to keep up with the rising costs. Secondly, inflation is going up but not quite as high as it was in the past two years. That means that retirement dollars won’t have their purchasing power eroded as much (although inflation is increasing and it will go down a bit). Still, the prices of everyday goods and services are high as-is, especially for retirees on a fixed-income budget.

Let’s go through what the 2024 COLA for Social Security means, how they calculate this raise, and what you can do to make your money last longer. With statistics showing people spending as much as one-third of their lives in retirement, knowing how your Social Security benefits and other income sources work together can help you stretch your retirement dollars.

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