Tag Archives: Annuities

Don’t Make Health Insurance Mistakes

Don’t Make Health Insurance Mistakes

If possible, you should try to keep your health insurance. Not understanding the requirements and rules of your plan leaves you at risk of inadvertently losing coverage upon retirement. Many mistakenly assume that Medicare will take care of all their health care needs when they turn 65-years-old, but it doesn’t. At that time, you’ll need a Medicare Advantage Plan or Medicap supplemental policy.

Smart Investing

Your financial advisor has most likely advised you to maintain a balanced portfolio of both bonds and mutual funds. This is because taxation and inflation can take large chunks out of your income and you need a portal for long-term growth.

Understand Your Retirement Funds

You should review your retirement fund options with your financial advisor, asking as many questions as you need to understand all the options and processes.

Work With A Fee-Only Financial Planner

It’s always best to work with a financial planner to understand all the complexities of financial planning, the various options available, and what might best accomplish your particular needs and goals. Make sure that your financial advisor is fee-only, meaning they are charging you a fee for their advice. The person advising you shouldn’t be someone that may have an alternative agenda, such as selling retirement products.

Postpone Social Security Benefits

It may be better for you to draw from your IRA or 401 (k) plan before applying for benefits through the Social Security Administration, as this could mean your Social Security benefits will be higher. Typically, someone that postpones drawing benefits from age sixty-two to age seventy will see an increase of around 76%.

Postpone Annuities

Annuitization should be postponed until you’re in your early eighties or late seventies. This means the fixed monthly payments won’t have to last as long and will be more apt to cover your financial needs.

Postpone Reverse Mortgages

A reverse mortgage is a viable option for those running out of money during their retirement years, but this should be something put off as long as possible.

Think Outside The Box

Some may fall short of their financial retirement goals before or during retirement. Desperate times call for desperate measures. It may be necessary to think about communal living. Depending on family dynamics, living with your children may be a viable option.

Understanding the Difference Between Annuity, Bond and CD Ladders

Understanding the Difference Between Annuity, Bond and CD Ladders

One great way of creating a gradually disbursing retirement benefit while still keeping the long-term savings portion of your money conservatively invested is to create a bond, annuity or CD ladder. These ladders are separate investment instruments with varying maturity dates that allow you to take advantage of long-term savings rates while still making sure that some of your money is readily liquid when you need it. This strategy is called “laddering” because each maturity date is its own rung on the ladder of your retirement years.

While each ladder is a great strategy in its own right, it’s important to understand the differences between each of them before you decide which is (or are) right for your retirement plan.

Annuity Ladders

An annuity ladder is created when you spread out your annuity purchases over several years. Instead of investing all your retirement savings at once into a single annuity contract, you only invest some of the proceeds. The rest remains invested in equities, bonds, CDs and other appropriate investments. Then, over time, say every 5 years, you buy another annuity. Doing so helps insulate your savings from being locked in to low-interest annuities. This gives you the benefit of guaranteed income without interest rate risk.

Bond Ladders

Bonds are debt instruments that act as loans to companies and municipalities. While the issuer is using your principal for their projects they pay out interest to you. Once the bond matures, you are paid back the principal that you invested. When you create a bond ladder, you purchase several bonds with varying maturity dates. The later maturity dates afford the investor greater interest payments, but the earlier maturing bonds give the investor liquidity when they need it. Many bonds also have put options so that if you should pass away before the bonds in your ladder mature, your family can execute the put and be paid the principal by the bond issuer.

CD Ladders

CD rates vary depending on how long you are willing to have your principal tied up in the CD. A 20-year CD will have a significantly higher rate than a 6-month CD, but tying all your retirement money up for 20 years in order to get that rate is not a smart strategy since you are likely to need something to live on during the 20-year period. With a CD ladder, you can invest a portion of your savings into CDs with varying maturities. They will mature and pay you your principal and interest throughout the years as you enjoy your retirement.

Liquidated earnings are subject to ordinary income tax, may be subject to surrender charges and, if taken prior to age 59 1вЃ„2, may be subject to a 10% federal income tax penalty.

Guarantees and payment of lifetime income are contingent on the claims paying ability of the issuing insurance company.