Retirement Planning Blog

Sequencing Risk and Its Challenges for Retirement Planning

Sequencing Risk and Its Challenges for Retirement Planning

If you look at any financial commentary, there is at least an article a day talking about investment risk. Investment risk, or the risk of losses due to market downs, is always something that we should be conscious of. But, for retirement investors, there is an even bigger risk than investment risk: sequencing risk.

This type of risk can be more dangerous than pure market risk because of the effects that it can have on your long-term retirement outlook. This can have a nasty impact especially if your money takes a hit in your early retirement years.

Sequencing risk looks at the order in which your portfolio returns occur. If you take losses early in your retirement, then it will impact your finances for the rest of your life. And you might well spend the rest of your retirement playing “catch-up” from those losses, especially if you were already drawing income from your portfolio and compounding the effects of those losses even further.

Sequencing risk can have strong effects on people’s financial wellness that can span years. So, it’s critical to have a strategy in place for this possibility, especially if you are in the retirement red zone (within 10 years before or after retirement). Read More

Safe Money and Income Strategies – Making the Most of Your Retirement Savings

Safe Money and Income Strategies - Making the Most of Your Retirement Savings

Are you looking for safe money and income strategies that you heard of on the radio or someplace else? After a long career, most people would like a financially secure retirement that they can spend in peace and comfort.

This probably applies to you as much as anyone else. As you prepare for your post-career years, you may have heard or read about those “safe money and income strategies.” If you have, you may be wondering exactly what they are and whether they are right for you in your current financial situation.

What Are Safe Money and Income Strategies?

This sort of strategy follows a retirement school of thought that emphasizes income, safety, and protection. At its core, a safe money and income strategy can:

  • Pay regular predictable income to you for as long as you live.
  • Protect your hard-earned retirement assets.
  • Grow your money with a guaranteed interest rate.
  • Possibly earn more interest above a certain minimum rate.

Many fixed-income assets can serve as its lynchpin, from fixed-type annuities to bonds or Treasury securities. However, only annuities can truly pay you a guaranteed lifetime income.

What’s more, historically low interest rates have made it that much harder to live off of the interest from corporate and municipal bonds, CDs, Treasury securities, and savings bonds.

This isn’t to say that these instruments can give you some yield for dependable retirement income. It’s just harder in this lower interest rate environment. Read More

What is a Typical Floor on a Fixed Indexed Annuity?

What is a Typical Floor on a Fixed Indexed Annuity?

Some index-based financial products have a “floor,” or the maximum value you would lose if the index went down. In a fixed indexed annuity, the floor is expressed as a guaranteed minimum interest rate. This floor is usually set at at an annual rate of 0%, meaning that even if the index decreases in value, the interest to be credited won’t be negative.

Essentially, the annuity floor will consist of your annuity’s accumulation value plus the guaranteed minimum rate. You can never lose money due to any index declines. But your money may lose value in the times of index losses, if the indexed annuity contract has optional rider fees or you pay a surrender charge for early withdrawals.

If you are researching fixed index annuities to see if annuities may be for you, it’s helpful to have a good knowledge of the essentials. Let’s get started with a more in-depth discussion of a fixed indexed annuity, some of its common features, and how the floor guarantee may work. Read More

What Is the Difference Between Immediate and Deferred Annuities?

What Is the Difference Between Immediate and Deferred Annuities?

Annuities are a growing option for retirees looking for relatively ‘worry-free’ places where they can place their money without too much stress. There are many different types of annuities. But all annuities can fundamentally be divided into two main categories: immediate and deferred annuities.

By definition, an annuity is when someone puts a single lump-sum payment or a series of payments into a contract offered by a life insurance carrier. At a later point, this person starts receiving a stream of income from the annuity contract. The income stream can be for either a set period or the rest of their life.

So, what are the key differences between a deferred and immediate annuity? Here’s a quick look at the overarching distinctions. Read More

Should You Buy An Annuity At Age 50?

Should You Buy An Annuity At Age 50?

Chances are you have heard of annuities at some point. When they have a clear role in your plan, they can be an excellent part of a retirement strategy. If you are in your 50s, you might have thought at some point or another: Does an annuity make sense in your 50s, even when retirement might seem still quite a few years away?

Well, the answer rests on three primary factors: when you plan to retire, what your timeline is from now until then, and what you would use the annuity for. Read More

How Annuities Can Help You Maximize Your Retirement Income

How Annuities Can Help You Maximize Your Retirement Income

When the World War II generation finally retired, many former workers were able to count on a secure corporate pension to supplement their Social Security income. This pension income lasted for as long as they lived. Then it often continued to pay the surviving spouse after the initial recipient had passed away.

But pensions have largely disappeared from the corporate landscape. In turn, this has left an unexpected hole in the retirement plans of many retirees.

However, many people have found an alternative in annuities as a way to generate guaranteed income that they can count on every month. Annuities can provide a type of privately-funded pension income in a manner unlike any other type of financial instrument in the marketplace today.

Annuities are designed to pay a stream of guaranteed income for as long as someone lives. This holds even if someone receives more money from the insurance company than what was in their annuity contract. Read More

Why Consider Annuities in a Low Interest Rate Environment?

Why Consider Annuities in a Low Interest Rate Environment?

Annuities can certainly strengthen your retirement plan even while interest rates are low. Among other things, they can add more predictability and stability to what you already have.

But what can you do when interest rates are at rock-bottom? In response to the economic fallout from the coronavirus pandemic, the Federal Reserve has dropped the target rate for its benchmark federal funds rate (its overnight lending rate to banks).

Now the target range for this rate is zero to one-quarter percent. The last time the Fed did this was during the financial crisis. In 2008, it dropped the rate to the same target range, and this didn’t change course until December 2015.

The pandemic had an unprecedented impact on the economy. It put tens of millions of people out of work in just weeks and left many sectors basically on standstill. Read More

Bonds and CDs – What Are Their Pros and Cons?

Bonds and CDs - What Are Their Pros and Cons?

Many financial advisors today tell their clients that once they reach retirement age, they should probably have at least some retirement savings housed in conservative, low-risk holdings. The question of how much money depends on many factors, including what someone’s personal risk tolerance is.

Often those holdings are made up of bonds, CDs, or other such instruments that don’t have the same volatility as stocks or stock funds do. That being said, these investments have their own set of pros and cons that can affect their performance over the long term. This is especially true when interest rates are low as they are now. Read More

How Can Annuities Help You Avoid Probate?

How Can Annuities Help You Avoid Probate?

Estate planning isn’t likely to rank high on your list of fun things to do. Thinking about a post-death legacy and what you wish for loved ones probably isn’t high up there, either.

But having a proper estate plan is beneficial in many ways. It can ensure that your assets are distributed in the manner that you desire after you are gone.

Depending on the size of your estate as well as your state of residence, you may be facing estate taxes on your assets. There are ways that you can reduce that tax liability if you might choose so.

But one legal process can also derail your legacy wishes, tie up your assets for a long time, and lead to family drama that otherwise wouldn’t happen: probate.

The good news? One way that you can avoid probate on some of your assets for certain is if you have money in annuities.

With how they are treated under law, annuities exempt the money within them from this often time-consuming and drawn-out proceeding. Read More

Do Annuities Offer Creditor Protection?

Do Annuities Offer Creditor Protection?

Annuities are contracts between you and an insurance company. As the policyholder, you are entitled to certain guarantees provided to you by your life insurance company.

You can enjoy guaranteed income for life, guaranteed growth, guaranteed protection against market risk, or a guaranteed death benefit, among many other benefits.

Annuities also give the benefit of tax-deferred growth until you start withdrawing money from them. Not only that, annuities can also provide you with certain protections against creditors.

However, this helpful protection characteristic of annuities can vary by state. Here’s a quick look at how annuities can offer various creditor protections if you are concerned about the exposure of your assets or money. Read More

Next Steps to Consider

  • Start a Conversation About Your Retirement What-Ifs

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    See how the crucial differences between independent and captive financial professionals add up. Learn More

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