Retirement planning covers lots of areas. But have you heard of a situation where someone with $500k – $600k in retirement savings might be ‘richer’ than someone who has $1 million? Economic paradoxes like this and other insights are discussed in a new film, ‘The Baby Boomer Dilemma.’
You may have heard of The Baby Boomer Dilemma documentary, which takes a close look at the retirement landscape in America and how it’s being funded. The movie centers around the fictional story of a Florida couple, who have concerns about their future financial security.
An 85-min film, The Baby Boomer Dilemma ends with the wife distraught about not having a guaranteed source of income for their retirement, whether a pension or an annuity. Here’s a little bit more information about the film’s content. If you have any questions about the movie or would like to request a personal retirement consultant based on the movie’s principles, please fill out the contact form for more information.
If you are one of the lucky few with a defined-benefit pension, then you might have wondered about what your options are with a pension versus an annuity. But while pensions were a common thing of the past, they aren’t around as much anymore.
In the days before smartphones and social media, many people had only one employer. Throughout their career, folks worked for one company and received a pension when they retired. From there, they would receive payments for the rest of their lives.
Today, unless you have a government job of some sort, pension benefits are rare. An annuity may be a good option for you if you don’t have a pension but like the idea of receiving income for the rest of your life.
As you consider the pros and cons of annuities vs. pensions for retirement, here are some key factors to consider.
You may think of life insurance as a way for people to protect assets or provide a windfall for heirs. But it’s also useful for survivorship strategies in retirement. When one spouse passes, the other is left with more than loss of love and support.
The survivor loses income from a second Social Security benefit. If their spouse had a pension or other benefit that paid income while they were alive, chances are it also goes away. Even so, there are steps you can take to protect against these risks.
One example financial plan with such strategies was once presented by Zach Parker, senior vice president of wealth management and product strategy at The Advisor Group. At one industry event, he showed how a combination of term life insurance and universal life insurance can provide income protection for both spouses.
As a public employee, you could contribute to your 457(b) retirement plan to save for your future. In many ways, a 457(b) plan is similar to a 403(b) or 401(k) plan. A 457(b) plan is offered through your employer and is designed to help you save money for retirement.
Also known as a deferred compensation plan, a 457(b) plan is commonly offered to government employees – especially those working for local and state governments.
A few examples of who might have this plan are:
Government officials
Police officers
Firefighters
Emergency medical technicians
Public school teachers
Those who work for a city, like sanitation workers
Using this employer-sponsored retirement account, you can contribute pre-tax dollars. Also, you won’t pay taxes on that money until you withdraw it, usually during retirement. In this way, your contributions can grow tax-deferred until withdrawals are taken.
A non-qualified annuity is a contract designed to provide you with regular, guaranteed income during your retirement years. Non-qualified annuity policies are started with money which has already been taxed.
Non-qualified annuities can be a nice addition to a well-rounded portfolio. They can ensure that you have regular, predictable income on top of your Social Security benefits during retirement.
While they are funded with after-tax money, non-qualified annuities give the benefit of letting your money grow tax-deferred. In certain situations, they may also help reduce your overall taxable income in retirement, which can lower how much of your Social Security benefits might be taxed.
Another use for a non-qualified annuity is if you wished to retire early (say in your early 60s). It can fill in any income gaps between your monthly expenses in retirement and what your other assets may generate for cash-flow.
Here’s a closer look at how non-qualified annuities work and how they can be adapted for different situations in a retirement financial plan.
Dr. Wade Pfau is a leading expert on the subject of retirement. He is the Professor of Retirement Income at The American College of Financial Services and is also Co-Director at the New York Life Center for Retirement Income.
Dr. Pfau has made many powerful contributions in the field of retirement income planning. One is adding insights to the ‘safety-first’ school of retirement planning thought, or where a retirement plan is built on a safety-first approach.
How a Safety-First Approach Can Help with Financial Stress
In an interview with Wharton School of Business podcast knowledge@wharton, Dr. Pfau talked about how retirees can reduce the amount of financial stress that they feel after they stop working.
Here are some highlights from that interview. It’s good to keep these things in mind as we plan for our own financial futures.
As a federal employee, you have spent years in your career and want a comfortable retirement. But it’s often tough to find advice in this area that fits your situation with government employment.
If you read the newspaper or surf the web, chances are you have come across some articles with retirement advice. For many people, these insights can be quite helpful: catching up on retirement savings, estimating how much retirement income that you will need, deciding when to retire, and so on.
But in many cases, these insights don’t matter as much to federal government employees. In fact, a great deal of the advice may not apply at all. Why?
Federal Employees Need Tailored Retirement Guidance
As a government employee, you need information that covers your unique federal employee benefits and they fit into your financial picture. One big question: how you can optimize your employee benefits for a comfortable and secure retirement after you separate from service?
It’s important to be able to answer questions such as this, so that you can make confident and well-informed decisions for your family and yourself.
Here’s a few reasons why generic retirement planning advice doesn’t cut it for federal employees – and, instead, how tailored guidance can make a world of difference for their unique employee benefit programs.
If you have just turned 65, then you might be eligible to enroll in Medicare. Medicare is a health insurance program offered by the federal government to retirees and others who qualify.
There are many options for health coverage with Medicare. It’s good to understand a little bit about these options, as they may be confusing, or at least at first.
To help you get started, here are some basic questions that you probably have about Medicare – and what different things can entail.
As a Nobel Prize winner and professor of finance, emeritus at Stanford’s Graduate School of Business, William Sharpe is a big deal in the world of finance.
He has spent the majority of his life thinking about financial risks. He was instrumental in developing the capital asset pricing model and the Sharpe ratio, which measures risk-adjusted investment returns. In other words, when he has some things to say about retirement, that means it’s worth paying attention to.
An equity indexed annuity is simply a dated name for a fixed indexed annuity. Fixed index annuities came about in the mid-1990s.
They were intended as an option for retirement savers looking for alternatives to low-interest CDs and low-paying fixed-interest instruments, such as Treasury securities.
How the “Equity Indexed Annuity” Came About
Life insurance companies used different names in marketing fixed indexed annuities to the public. Since they are fixed insurance contracts and therefore under the authority of state insurance commissioners, the term “equity indexed annuity” eventually went out of vogue.
It made people think that a fixed index annuity was a securities product. However, it still remains a fixed insurance product regulated by the states to this day. There is no “equity” component at all to a fixed index annuity.
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