As we grow up in American, we are taught to work very hard to provide a decent income that will allow us to take care of our families, do our best to educate our children, and set goals that will provide a secure retirement. As time goes by, and the retirement age approaches, it would be wise to consider the following questions: Do I have enough money saved to retire? Will taxes have a major impact on our standard of living? Are our retirement safe in the monetary vehicles we are currently using?
I want to suggest looking into an Indexed Annuity. First off, an annuity is essentially a savings account with an insurance company. A very important benefit is that your principal investment and credited interest can never be lost due to index volatility. Indexed annuities are fixed annuities that allow a great chance to potentially earn a lot more interest than traditional fixed annuities and other accounts that are considered safe money alternatives. This is achieved by basing the interest earned on this particular annuity on an increase in equity or a bond index. You as a consumer have total control over how your annuity can accrue interest by choosing the index crediting methods on the anniversary of each contract year. The most commonly used indices are; the Dow Jones Industrial Average, 10-Year U.S. Treasury bond, and the S&P 500. When you purchase an indexed annuity, you own an annuity contract backed by an investment life insurance company; you are not directly purchasing shares of stock or indexes.
Annuities is a tax deferred investment that allows you to maximize both growth and safety for your retirement dollars that you worked hard for, making your money double almost twice as fast as taxed investments. Fixed annuities by their very nature are considered a safe money alternative. It is a contract between you and the insurance company for guaranteed income options. Guarantees are backed by the financial strength and claims paying ability of insurance companies.
Creating a nest egg for retirement is hard work, and while expression a lot of people already consider the market risk for their money I want to elaborate on six of the major concerns facing your retirement dollars.
Let’s take a look at the safety of your retirement. The problem is how can your retirement dollars grow without risking your initial premium. It’s imperative that an insurance company’s portfolio is conservative and maintains high liquidity to meet the contract owners’ needs. Only an insurance company has the regulatory reserve requirements and the financial strength to provide all the guarantees of an annuity.
Next is the avoidance of probate. Probate is the legal process of administering the estate of a deceased person by resolving all claims and distributing the deceased person’s property under the valid will. Probate administrative costs and fees can be a substantial burden on the assets of your estate. Your assets are not available to your love ones until your estate is approved by the probate court. The average time your assets remain tied up in probate court is one year. Another problem with probate is that your asset records are available to the general public. An annuity, with a properly designated beneficiary, may bypass the probate process and may avoid probate administrative costs, fees, delays and publicity. Therefore, at the time of your death, more of your money goes to the family members you chose and not the courts.
Another concern is being able to lock in interest credits. You had success in the market in the past years, however, you don’t want to go backwards due to a market downturn. To offset the effects of inflation, indexed annuities offer potentially higher gains based on the appreciation of a bond or stock index. You can lock in your interest annually and still continue to grow with future appreciation in the index.
The problem with taxation is that the interest earned on most checking and savings accounts, CDs, mutual funds, dividends (except for special tax-free funds), T-bills and common stock dividends may be taxable by the Federal and the State Government each year as earned, even if you do not take the interest out. Interest credited to your annuity is not currently taxable by the Federal or State Government each year, unless withdrawn or annuitized. This allows you to earn interest on your premium, on your interest, and on your dollars that would have normally been paid in Federal and State Income Taxes.
Outliving your income is another major concern when considering your retirement. In 2000, there were 50,000 people age 100 years or older. In the year 2010, it is estimated there will be over 131,000 people age 100 or older! The 85 plus year old population is projected to increase by over 43% between 2000-2010 and 70% between 2000-2020. These statistics are based on the U.S. Bureau of the Census. You need two Guarantees for your retirement income. Your monthly income checks must stay the same every month never decreasing, when interest rates decline. Your monthly income check must keep coming to you for your entire life, no matter how long you live. Most financial vehicles you have looked at, or have money in, cannot give you these guarantees. Only annuities can guarantee your monthly income check, could be the same every month depending on the settlement or income option selected. Your income cannot decrease if interest rates fall. Your monthly income check keeps coming to you as long as your live. Your annuity income cannot run out. Also, if you die prematurely, your annuity can be guaranteed to continue at the same monthly amount to a named beneficiary if a specified period is chosen.