Tag Archives: Retirement Income

Few People Concerned About the Cost of Long-Term Care

Few People Concerned About the Cost of Long-Term Care

A recent study conducted by Greenwald & Associates for John Hancock Life Insurance Company reveals that Americans hold a frightening number of misconceptions about their potential need for long-term care. The survey compared current attitudes about long-term care with results of similar John Hancock surveys conducted in 1996, 1997, and 1998.

Of those polled, 57% said they were concerned about long-term care costs. This was down from 69% of respondents in the 1997 survey. In addition, only 51% (as compared to 59% in 1997) expressed worry about ever needing long-term care. Interestingly enough, the current survey revealed that 64% of those polled believed they would live to age 85 versus 61% in 1998. Also, 85% of the current respondents felt that the cost of long-term care could significantly reduce their retirement income versus 76% in 1998.

However, in spite of their concern about the loss of retirement income, the researchers discovered that 69% of the respondents have done little or no planning for long-term care. This is up from 58% in 1996, and 49% in 1997. In fact, 43% have made no provisions at all, up from 34% in 1996 and 24% in 1997.

When questioned as to how they would pay for long-term care if they didn’t buy insurance coverage, 43% of those responding said they’d pay the entire cost out of pocket. This is up from 40% in 1997. But 46% felt they couldn’t afford even one year of long-term care, given their current assets.

Reactions varied when the subject of depending on the government for long-term care was asked. Most of the respondents lacked confidence in the future of Social Security, Medicare, or Medicaid: 61% are not confident Social Security will be around at their retirement, up from 53% in 1998; 62% percent have no confidence that Medicare will be enough to cover their expenses, compared to 61% in 1998; and 62 percent felt that Medicaid won’t be available at all, up from 55% in 1998. Regardless of their feelings about the solvency of these federal programs, 47% said they’d pay for long-term care costs by transferring assets to family members and becoming eligible for Medicaid.

The most startling fact revealed by the study is that these unrealistic expectations about the need for long-term care and how to pay for it is not confined to any particular age group: the researchers polled 1,000 people ages 21 to 75 to obtain their results.

Escape from Stock Market Uncertainty

Escape from Stock Market Uncertainty

Investors, especially those that experienced considerable losses and watched helplessly as their investment portfolios fell to pieces during the last stock market crash, are making much more cautious investment decisions today. A fixed annuity has gained a great deal of investor appeal for many cautious investors. Compared to alternative investments of equal risk, the fixed annuity has several significant advantages.

Fixed Annuity Advantages

There is the chance of significant appreciation when a lump sum is invested into a tax-deferred annuity, and the process is much quicker than a savings account or CD. The element of tax deferral is one of the most appealing advantages. Unlike other options where earnings are taxed each year, the tax-deferred annuity also allows taxes to be delayed or deferred until the money is withdrawn.

Another attractive fixed annuity advantage is the opportunity for guaranteed lifetime income. There is much debate about the future, potential of insolvency, and possible ineptitude surrounding the Social Security program(s). Many are fearful that the system will resort to a drastic decrease in benefits or entirely dissolve benefits. Comparatively, the guaranteed income of a fixed annuity is much more attractive.

The Baby Boomer generation, in particular, has lost faith in the federal government’s ability to contribute to their retirement income. This group is also not very prone to placing faith in the stock market or any volatile index investment. Instead, the Baby Boomer generation tends to opt for the less glitzy guaranteed return from a fixed annuity.

How to Choose a Fixed Annuity

First, you will want to find a company that has a stable and steady track record, as the annuity will most likely need to last you 10-30 years post-retirement. A sign of adequate financial stability can be found using a Standard and Poor’s rating. An “A” rating by a firm like this is usually a good indicator of stability. Make sure to look back at past ratings too; the goal is consistently high ratings for several years.

Peruse the numbers carefully. An unusually high guaranteed interest rate may be indicative of sizable fees, which will definitely decrease the return on your annuity.
You should also determine if there is a penalty for early withdrawal and the circumstances where the penalty might be waived. Generally, a fixed annuity will have a penalty or “surrender charge” if you withdraw the funds early. The penalty will usually phase out in seven to five years. However, some annuities feature a wavier of withdrawal penalties if you are critically ill or confined to an extended care facility.

The professional advice of Brian Gruss can be an invaluable asset when considering a fixed annuity.
Liquidated earnings are subject to ordinary income tax, may be subject to surrender charges and, if taken prior to age 59 1/2, 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.

Fill Up Your Buckets for a Stream of Retirement Income

Fill Up Your Buckets for a Stream of Retirement Income

If you’ve heard it once, you’ve heard it a million times: when it comes to retirement planning, diversification is key. Everyone knows how important it is to build up a healthy nest egg—but if you put all your eggs in one basket, you are putting your financial well-being at risk.

Look at it this way: if you throw all of your funds in one investment or market sector, what happens if that sector takes a nosedive? Your retirement savings will go down the tubes right along with it. However, if you spread your investment funds across a variety of different assets, you will greatly decrease your risk.

So, how can you possibly protect yourself from financial devastation and still save up plenty of funds for a comfortable, happy retirement? Simple. It’s time to fill up your buckets!

The art of bucket planning

As Americans are living increasingly longer lives, one of the greatest risks today’s retirees face is the possibility of outliving their income. That’s why financial experts recommend that retirees adopt what’s called “bucket planning.”

Bucket planning is the act of spreading money across various pools income to ensure you have a lifetime stream of income. This strategy is growing increasingly popular in the retirement planning field. As a matter of fact, approximately 52 percent of financial advisors recommend the bucket planning method to their clients, according to Gallant Distribution Consulting.

Collect your buckets

There are a few different bucket planning methods. Some financial advisors recommend three buckets while others say you should fill up four. However, the most basic bucket planning strategy includes the following three pails:

Bucket #1: This bucket holds into low-risk investments, such as short-term Treasury bonds. This pool provides a stream income for the first five to seven years of your retirement.

Bucket #2: This pail should be filled with indexed annuities, which offer guaranteed income with an upside potential if the markets do well. This bucket will provide income for years 8 through 15 of your retirement.

Bucket #3: This is the bucket for long-term investments that will provide a guaranteed stream of income in your later years.

Another version of bucket planning includes investing in three or four different fixed or fixed indexed annuities, each which has a unique set of terms and benefits.

In either strategy, each bucket represents a different stage in your retirement. The primary objective of your first two or three buckets is to create an annual income stream during your first 15 years of retirement. When those 15 years are up, the last bucket still holds plenty of guaranteed annual income that will last throughout your lifetime. Because you have a bucket of income set up for each retirement phase, your cash flow will never run dry.

An endless stream of income

Bucket planning has skyrocketed in popularity because it can create an endless stream of income that you won’t outlive. If you set up your buckets properly, you won’t lose money, you’ll always be accumulating money and you’ll always have a guaranteed stream of income. That means you’ll live a comfortable and financially stable retirement without having to worry about outliving your assets.

In other words, if you fill up your buckets, you won’t run out of money before you—well—kick the bucket.

Liquidated earnings are subject to ordinary income tax, may be subject to surrender charges and, if taken prior to age 59 1⁄2, 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.

Immediate Annuities Can Help You Secure Your Retirement Income

Immediate Annuities Can Help You Secure Your Retirement Income

As you approach retirement, it’s natural to worry about your retirement portfolio. It is also natural to become frightened during a recession, such as the ongoing downturn that started in 2008. During tough times, your entire strategy can suddenly become worthless. The supply of cash that you have carefully built up over your working life is gone, vanished like so much dust. This is downright scary. What shall you do? Many individuals in this same situation end up taking part-time jobs in order to support themselves.

An immediate annuity can help you regain liquidity. Buying an annuity is like buying a monthly pension check. It is an insurance policy that pays you a lifelong income stream in exchange for a lump sum. There is no age limit for purchasing an immediate annuity; you can buy one at 80 or 90 if you want to. When the payments start is entirely up to you. Once you decide on a date, the payments are orderly and on time, appearing on that date every month for the rest of your life.

Consider several advantages to immediate annuities:

  • Your insurance agent will be able to tell you what the monthly payment amount is based on your lump sum.
  • The annuity is backed by the financial security and assets of an insurance company, so do your research before buying.
  • This product affords you, the beneficiary immediate peace of mind since the payments start when you choose. You can rest completely assured of a secure, stable long-term monthly income. You can even add an inflation rider to the policy so that your income will not get eaten by inflationary pressures.
  • Since immediate annuities are different from stocks and bonds, there is no worry about volatility or market fluctuations. The value of the annuity remains constant. You have the protection of knowing that every month, the money will be deposited into your bank account.
  • There are no fees of any kind to be paid – no management fees, no setup or administrative fees, and no annual fees.
  • Favorable tax treatment – Only a small portion of income generated from an immediate annuity funded with after-tax dollars would be taxable.  This is because part of every payment is considered a return of principal.

Is an immediate annuity right for you? That depends on your unique needs of course. For those seeking to secure a future income stream, immediate annuities are a perfect way of achieving a guaranteed monthly income which will not fluctuate due to external forces. The peace of mind possible with having an income stream one cannot outlive should not be ignored.

Liquidated earnings are subject to ordinary income tax, may be subject to surrender charges and, if taken prior to age 59 1⁄2, 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.

CDs vs. Annuities: Where Should You Invest Your Money?

CDs vs. Annuities: Where Should You Invest Your Money?

If you’re quickly approaching retirement, you’re probably asking yourself an all-too-common question: should I invest in a bank CD or an annuity? You’re not alone. Consumers across the nation are struggling with the same dilemma. The first step in making this important decision is to understand the differences between these two products.

Annuities and CDs (short for bank certificates of deposit) might appear to be very similar at first glance. Both are secure, low risk investments that are designed to help you accumulate wealth. However, these two types of investments are actually very different products.

First of all, CDs are generally issued by banks while annuities are offered by insurance companies. Secondly, a CD is typically a better investment for short-term goals, such as a down payment on a new home or car, while an annuity is a better choice for longer term goals, like generating a lifetime stream of retirement income.

Here are a few things to keep in mind as you weigh the differences between CDs and annuities:

CD interest rates are uncertain

Interest rates have plummeted in recent months. While that’s a great thing for homebuyers, it translates into lower returns on bank savings. Right now, one-year CDs often pay 1.5 percent or less—a huge drop from a couple of years ago when CDs paid more than 3 percent.

The future is uncertain for CD interest rates. Your rate on a CD may be higher or lower a year from now—it’s too hard to predict. So, if you’re looking to maintain a certain retirement income level, a CD may not be the best bet.

Guaranteed rates with fixed annuities

Fixed annuities offer a guaranteed minimum. This ensures that your investment will not drop below the minimum performance. When interest rates drop, so do returns on CDs. But fixed annuity returns never fall below a certain point. Therefore, if you hold a fixed annuity until maturity, you are guaranteed to earn a minimum stated rate of interest regardless of what happens to interest rates or stock market indexes. Because fixed annuities are lower risk, conservative investments, they are often ideal for retirees or soon-to-be retires.

Fixed annuities offer incredible tax advantages

With CDs, you must pay taxes annually on the interest earned even if you haven’t withdrawn any money. Alternatively, fixed annuity earnings are tax-deferred. You only pay taxes on interest earned when you withdraw money from the annuity. This means that you end up earning an increasing amount of money with fixed annuities because the deferred tax on your interest remains in the investment instead of being paid out to state and federal taxes each year.

CDs aren’t as flexible

Fixed annuities also offer more flexibility than CDs. With a CD, you cannot remove any money before the term is over without incurring an early withdrawal penalty. Although fixed annuities also have early withdrawal penalties known as surrender charges, they include provisions that typically allow you to withdraw 10% of your investment value each year without penalties. Additionally, with many fixed annuities, you can withdraw the earned interest on your investment each month.

Some fixed annuities offer you access to the sum total of your investment funds in the event of a financial hardship. For example, you may be allowed to withdraw from your fixed annuity penalty free if you are hospitalized, develop a life-threatening illness or are forced to live in a nursing home for an extended length of time. With a fixed annuity, you can also choose an option to receive a predetermined amount of income from the investment over a fixed time period, such as five or ten years. This option offers enhanced income security while spreading out any taxes that your earnings might incur over many years.

Annuities are extremely safe

While CDs are issued by banks, annuities are issued by insurance companies. As compared to banks and brokerage firms, insurance companies have a historical record of stability. This is largely because insurance companies offer conservative investment options that carry very little risk.

Just think: insurance companies have survived times of war, global depressions, government failures, industry scandals and disastrous stock market plunges. However, in even the worst of times, Americans have been able to safely insure their homes, health, life, cars and businesses.

Survey says…

All things considered, fixed annuities are a solid option for retirement-focused investors. These superior, reliable investments can provide higher returns, tax advantages and enhanced flexibility, all while providing safety and security. Not to mention that fixed annuities can generate a guaranteed stream of income.

Talk to Brian Gruss today about whether a fixed annuity is right for you.

Liquidated earnings are subject to ordinary income tax, may be subject to surrender charges and, if taken prior to age 59 1⁄2, 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.