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
As another year passes by, more people join the ranks of retirees. Since 2011, roughly 10,000 baby boomers have turned 65 years old each day, according to Pew Research. It predicts that trend to go on until 2029.
From second-act careers to volunteering and entrepreneurship, baby boomers are already reshaping the mold of retirement. And they are bound to keep redefining it, as record-breaking millions are set to leave the workforce.
With a new era of retirement living on the horizon, it’s prudent to take note of our retirement income planning strategies.
Will they provide reliable income streams and financial security for what could well be a decades-long retirement? Do they give a long-term assurance of you being able to enjoy your desired lifestyle? Or when it comes to these goals, does your income strategy have more of a question mark hanging over it?
In their career years, many people work with a financial advisor to build their life savings and plan to continue so in retirement. One notable survey of 200 advisors by investment company Incapital shows how advisors are preparing today’s retirees for the economic uncertainties of tomorrow.
The survey’s focus? What retirement assets these financial advisors were using to generateretirementincome for their clients. Read More
How much income will your annuity contract pay you? The answer depends on what age you start collecting income from your annuity.
If you start income at age 70-75, you will receive higher payouts. If you begin your annuity income in your mid-50s, it will be less than what you would receive in your 60s or later.
Annuities therefore resemble Social Security in that their payouts will increase the longer you wait to take them. But annuities with qualified money, or pre-tax dollars, in them have required minimum distributions that must be taken by age 72.
Why is this? Since the insurance company is on the hook for paying you guaranteed income for a certain period or life, it manages its risk based on the age of when you start that guaranteed income stream.
The insurance company also builds estimates of statistically how long it believes you will live into every single one of its income payments. These estimates are based on life expectancy and mortality data. Read More
Calculating how much income you will need for retirement isn’t necessarily an easy task. Your health expenses will probably increase, but your mortgage payments may decrease or stop. Meanwhile, other expenses might continue to change over time.
Of course, you likely won’t have to deal with payroll taxes as much. Chances are you will also see expenses tied to employment, from transportation to a professional wardrobe, decline as well. But other costs may appear in retirement, from pursuing long-sought hobbies to traveling or spending more time with loved ones.
Although you may not even know where to start when trying to estimate how much retirement money you will need, there are a few rules of thumb that you can follow to help get you started. Read More
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