Retirement Planning Basics

Retirement planning is a term that refers to the allocation of financial resources towards retirement. In most cases this simply means setting aside money or other similar assets for the purposes of collecting a living income once you’re past working age. Financial independence is the goal of retirement planning. Most people hope to be able to survive without working at all, so that they can just travel or spend time with family. Getting to this point, of course, takes some time and a lot of attention to detail through the years. Getting ready to retire is a process that ideally starts as early as possible in one’s working career. Allowing our investments more time to earn for us is the best way to build our portfolios.

Readiness to Retire

The process of putting together plans to retire involves two basic parts. The first part is assessing your readiness to retire given the lifestyle goals you have and the age at which you hope to retire. The second is to come up with possible actions and decisions to improve your readiness and to get closer to your goals. Every action we take as investors through the years are in relation to this recursive process. Ideally, we are always evaluating how ready we are for retirement and how well our plans are proceeding. And making adjustments to these plans and changing the course of our strategies are normal parts of the planning process.

Retirement planning is not something that can be done in a day, a week, or even a month. It is not an event but rather a recursive and cyclical process. The best plans are the ones that provide enough flexibility to allow us to make changes as the need for doing so becomes evident.

To achieve this kind of flexibility and to come out with the best series of investments to help you achieve your goals, it is good to work with a retirement planner to make the process simpler and to help expose you to ideas and investments you might not be aware of. Retirement planning can be a difficult and sometimes mysterious process, but professional planning can make the process a whole lot simpler.

Investors who wish to reach their retirement goals need to start investing as early as they possibly can. Getting into the market early gives your investments more time to perform and to earn income for you. Establishing a consistent pattern early on also helps build up the portfolio so that it can better withstand downturns in the market. A long term investment pattern characterized by consistency means the investor does not have to rely on luck quite as much in order to reach their financial goals.

Setting Realistic Goals for Retirement

Investors who want to live comfortably when they are through working need to set reachable goals that are based on the lifestyle they hope to have, not on someone else’s formula or benchmark. After all, it is your life and no one else’s. Be honest about the way you hope to live and determine how much the lifestyle you want will cost you. Work backwards from there to calculate how much you’ll need to save in order to supplement Social Security and any other income you’ve got coming to you.

One key aspect of retirement planning is choosing the investment vehicles you will use to help you reach your financial goals. There are many different kinds of investments available and different opportunities will appeal to different people. But 401k accounts are a great way to put money away for retirement. A 401k is an option that should appeal to just about anyone. Making contributions to these funds results in immediate and long term tax benefits. The contributions themselves are deducted from your taxable income, and the growth on the account is tax deferred until withdrawal. Plus many of these accounts feature matching company contributions.

Individual retirement accounts also offer great tax advantages for folks planning to retire down the road. A traditional IRA features tax deferred growth, meaning that investors pay income taxes on their gains upon withdrawal. A Roth IRA is different in that it does not allow for deductible contributions, but once contributions are in the account they are no longer taxed even at withdrawal. Good retirement planning involves choosing the best retirement vehicles for the goals you have and your capability to invest. One rule of thumb: even if it is not your primary investment, take advantage of company matched IRAs and 401k accounts by contributing at least the minimum needed to capture that company match. This is free money, and free money is pretty hard to turn down when we’re planning for a retirement that will probably cost more money than we’d like to admit.

Focus on Asset Allocation

Healthy retirement planning depends on asset allocation rather than on the performance of one single investment. For this reason, it is good to spread your investment capital around. Of course, investors should not get into financial investments just for the sake of diversification unless they understand the income and growth objectives of the investments and are confident in their prospects for future performance. This part of retirement planning often requires the help of a professional. Most of us are not exactly experts in retirement planning. But even if you do get some help from an expert, it does not mean that you have to surrender control over your portfolio. Individuals can work out their own agreements with financial planners as far as portfolio control is concerned. But it does pay to get help with planning.

Professional retirement planning services can help investors get into the right stocks. Out of all investment types, stocks have the best chance historically of delivering a good return on investment over long periods of time. Stocks tend to grow ahead of the rate of inflation, meaning your gains more than offset the declining value of the dollar over time. Getting help with retirement planning can give investors an inside edge on great stock picks and systematic investment in the market.

Smart Financial Planning

Smart planning will yield a comprehensive strategy for systematic and disciplined contribution to funds designed for income, growth, and limited risk exposure. Professional services can help consumers design the right portfolio given their particular goals. Retirement planning is no walk in the park, but with some work this planning can be done effectively and with success.

An example of financial planning after an investor has retired is the strategy to withdraw from taxable accounts first in order to let tax sheltered funds grow unimpeded for as long as they possibly can. Retirement planning in its essence is an effort to get more mileage out of the money we have to invest, both on the way in and at withdrawal when we retire.

Retirement planning is a whole life strategy that involves lifestyle choices in the present to help finance the future. As we get older the need for discipline in this area becomes more and more apparent. The wise ones among us are those who take retirement planning seriously while they are still young, giving them a head start.

An Income Plan for Life

You have worked long and hard and fortunately the fruits of our labor have allowed you to save for retirement. Now that you are looking to supplement your traditional income with retirement or investment income it is important to look at the hard earned nest egg and determine how this egg will feed you for the rest of your life. There are many options for liquidating your retirement savings into retirement income but not all options are equal. In this article we will discuss how to implement these retirement income strategies in order to provide you with an income you can depend on.

Now that you are ready to relax and enjoy your life’s work you will most likely look at the large dollar amount you have saved. While looking at this figure and congratulating yourself on a job well done it is important not to forget that this sum will have to support you for the remainder of your life, a life that may very well continue for 20 or 30 more years. This increased life expectancy and increasing cost of living is the primary concern for most retired Americans, “How do I guarantee that my retirement savings provides me with retirement income for the rest of my life?”.

Life insurance companies and financial banks have fortunately designed products specifically for assisting today’s retirees with transitioning retirement savings into retirement income. Increasingly growing in popularity with retirees are annuities. Annuities can be very useful because of the guaranteed safety of your investment, tax deferred treatment of interest growth, and life time income options. A Traditional diversified investment portfolio consisting of stocks and mutual funds can help provide an emergency fund for those unexpected twist and turns in life. Social Security does not provide an opportunity for investment growth or liquidity but it does offer a continues fixed income stream.

In order to answer the question of how to guarantee your retirement savings provides you with a retirement income for life, you will need to implement a plan that includes all three: Annuities, Stocks and Mutual funds, and Social Security.


The foundation of your retirement income may be social security, however, the majority of your retirement income will be generated by your annuity.

You will invest approximately 30% to 50% of your retirement savings in an annuity and then invest the remainder in a diversified stock and mutual fund portfolio. As discussed above the annuity will provide you with a guaranteed life time income that you can never out life. Your traditional investment portfolio will provide you with continued investment growth while also allowing access to larger sums of money in case of emergencies or extravagancies. Not to be overlooked in this plan is your social security payments which will supplement your large annuity income payments with modest income payments for as long as you live.

In order to fully implement your plan it is import that you have the trusted assistance of a licensed life insurance agent to guide you with your annuity purchase. In discussing your annuity options with your life insurance agent you will want to determine the amount of income the annuity will need to provide in order to supplement the short fall of your social security and pension (if you have one) income. Once you identify the amount of income needed you can then calculate the amount of principal deposit necessary for you annuity.

When investing the remainder of you retirement savings in stock and mutual funds you will want to find a balance between conservative investments in order to hedge against market volatility and investments that are positioned to generate future investment growth. You will also want to gradually scale your stock and mutual fund portfolio towards equities as you get older.
Once you have the pieces of your investment pie put together you are able to calculate your short term and long term retirement income. This will give you the peace of mind knowing how much money a month you will have to live on and knowing that this amount will be guaranteed for as long as you. The sooner you begin this process the sooner you will be able to adjust your expenses in accordance with your new retirement income stream.

What is your S.T.Y.L.E. of annuity?

Each person has a unique Style, houses have different Styles, and investments have various Styles.  Unfortunately we are unable to design a single individual financial product to meet our personally unique investment Style.  Fortunately the life insurance industry has developed various types of Annuities and no financial product today has the S.T.Y.L.E. of an Annuity.

Safety: In the financial industry annuities are synonymous with safety.  You can never lose money in a fixed annuity.  Fixed annuities have guaranteed crediting rates that assure that you always earn interest, even in periods of negative earnings in the stock and bond markets.  Annuities are offered by life insurance companies and thus are regulated by state law and are backed by the financial strength of the issuing company.  All insurance companies which offer annuities must legally maintain sufficient reserves to pay all guarantees in every issued annuity contract.  This means that regardless of an insurance company’s investment portfolio performance the insurance company must keep in reserve the funds necessary to pay your guaranteed interest rates.  All insurance companies which offer annuities are also monitored by third party rating agencies such as A.M. Best, Moody’s, and Standard & Poor’s.

Tax Deferral: You do not have to pay any taxes on the interest you earn in your annuity until you withdrawal those funds.  In the insurance industry, Tax Deferral is also known as The Power of Three because this allows your investment will to grow in three ways: interest earned on principal, interest earned on compounded interest, and interest earned on funds which you did not have to pay any taxes on.  Tax Deferral allows you to choose the time when it is best for you to withdrawal funds pay taxes on your earned interest.

Yield:  The primary purpose of many investments is to earn the greatest Yield possible on your investment, while maintaining a safe investment.  A secondary purpose of many investments is to obtain favorable tax treatment and the “T” in our S.T.Y.L.E. protects you there.  Annuities have consistently provided yields that are 1-2% higher than rates typically obtained via CDs and many Money Market Accounts.  Considerably higher interest yields combined with tax deferral allow you to maximize your return on your investment.

Liquidity: As important as it is to ensure that your investment is Safe, enjoys the fruits of Tax Deferral, and earns the highest possible Yield, it is equally important that you have access to your accumulated funds.  Annuities provide you with liquidity via penalty-free withdrawals, annuitization, and living benefits for nursing home care and terminal illness.  It’s not only what you earn but the ability to access your fund that counts..

Estate Planning: Upon your passing your annuity will allow for an immediate transfer of benefits to your designated beneficiary.  Unlike many investments, annuities are not subject to probate, transaction fees, and timely transfer delays.  Once your annuity has been transferred to your beneficiary(ies), your beneficiary may choose whether to continue the investment, liquidate the account via a lump sum payment, or annuitize the account via payments over a specified period of time.  Annuities also allow for your estate to avoid taxes by designating a beneficiary who is outside of your estate.

There is no investment tool in the market today with the S.T.Y.L.E. of an annuity.  In order to obtain additional information please contact us.

Retirement Planning: Income for Life

When planning for retirement you must consider the two phases of your savings plan: the accumulation phase and the liquidation phase.  It is not only important to systematically save and invest for retirement; you must also plan to ensure that you do not out live your retirement monies.  Ensuring that you have adequate funds to support you for your entire life is an increasingly difficult challenge.  As life expectancies increase, cost of living increases, and tax rates remain uncertain it is increasingly more important to ensure that you have a guaranteed income stream which you can never out live.  Fortunately public demand has created a financial vehicle known as a Deferred Annuity.  Annuities will allow you to enjoy tax benefits and principal protection during the accumulation phase of your retirement plan and guarantee you an income source for your entire life during the liquidation phase of your retirement plan.

Phase one of your retirement plan consists of saving monies and investing them for retirement.  When saving and investing for retirement it if important to invest conservatively and take advantage of any tax benefits the market may offer. Investing conservatively does not mean necessarily capping your earning potential but does mean protecting yourself from any principal loses.  The later you are in your life and investment cycle the less you can afford to be exposed to any loses in your retirement portfolio because you do not have the income or the time to recoup those loses.  Annuities have the ability to guarantee your principal and ensure that regardless of what happens in the stock market that you can never lose a single dollar.  Annuities also provide you with tax deferred earnings.  Tax deferred earnings allows your entire account’s earnings to remain in your investment and continue to compound.  Most investments outside of a qualified plan are not tax deferred which means that you have to pay taxes every year on the earnings you gained that year and this of course means that you then have less money invested for the next year.

Phase two, often the most important phase, is liquidating your retirement account.  When planning for accessing your retirement money it is vital to ensure that you do not out live your retirement savings.  Today it is increasingly difficult to ensure that your retirement savings will result in adequate income for your entire life.  As life expectancies continue to increase and as cost of living continues to increase it means that you will need more income for a longer period of time than many people imagine.  Many annuities offer guaranteed income for the rest of your life.  An annuity with a guaranteed income for life option will ensure that you will have a predictable and continuous income stream no matter how long you live.  One of the biggest financial fears of seniors today is becoming a financial burden to their loved ones.  An annuity with a guaranteed income ensures that you will always have your own source of income which will never run out.

There numerous types of annuities which provide you with the safety of principal protection and tax deferred benefits during your accumulation phase and guaranteed income for life during you’re the liquidation phase of your retirement plan.  It is important to work with a trusted licensed life insurance agent when researching the market and selecting the annuity to best meet your retirement needs.  As Ross Perot said about retirement planning “The hardest part of starting, is starting.”

How to Create Your Own Private Pension


Many baby boomers are approaching retirement or are already in retirement and are worried that they may outlive their savings. This worry is compounded by the advances in medical care which is extending the lives of millions of Americans, and the historic low rates investors are receiving on their savings. If those two trends weren’t enough cause for worry, the bursting of the real estate bubble has left millions of seniors with lowered values in their primary asset, their homes! These trends have wreaked havoc on retirement plans that looked quite sound even 5 years ago. While we’re spreading doom and gloom we’ll throw one more monkey wrench into the stew and that is the problem with downsizing. Aside from the previously mentioned issue with people being trapped in their real estate holdings hoping for a bump in valuation and market demand, a recent Wall Street Journal article points out that plans to cut down on one’s living expenses once retirement begins has proved to be difficult. Who wants to give up their cable TV, wireless phone, or internet service?

Moreover, this worry about outliving one’s savings has compelled many baby boomers to take more risk in order to shore up their retirement funds. The favored risk is the stock market through direct stock holdings or via mutual funds. The appeal is understandable- purveyors of stock investments show a 30 year return on the S&P 500 of about 8%, which beats the heck out of money market rates of about ¼ of 1%! The problem is that most stock promoters don’t like to talk about the trend over the last 5 years because the financial meltdown hurt most portfolios so much their return has been about zero. Once in a lifetime anomaly you say? Well we had the tech wreck about 7 years before the subprime crisis which also devastated stock portfolios. Stocks are great in proportion to your total holdings and your time frame until you need the money. It makes perfect sense for a 40 year old to put up to 80% of their portfolio in stocks because they have 30 years to let the market’s twists and turns play out. Retirees should have much less of their portfolio in the stock market because they need reliability of returns in order to live off the money!


Most of the major insurance companies have annuity products that offer “lifetime income” payments regardless of how long a person or couple may live. Also called “longevity insurance,” these annuities are designed to offer guaranteed returns of 4 to 6% yearly prior to the income payments beginning such that the investor chooses when the lifetime income stream begins. With such an annuity, would-be retirees can use a small piece of their portfolio to purchase a relatively large income. In return, investors must be willing to defer that income—typically, for several years—and give up access to at least some of their money The idea is the longer one can allow the value to build, the greater the monthly or yearly payment amount becomes. These annuities can be purchased using a “laddering” approach so that you may purchase them at different intervals as well as begin payments in different future years. .

Politicians and economists have proposed using these policies to help prevent workers from running out of money during retirement. In February, the Treasury Department issued a proposal that would make it easier for people to buy them in their 401(k) and individual retirement accounts. If you purchase these annuities in your 401k or IRA, you may be required to start the income payments at age 70 and ½.

There are many variations on this product such as how much additional money you have access to if needed and leaving unused balances to your estate. Your advisor can tailor this investment to fit your needs. The important aspect is that placing some of your nest egg into this investment will avoid the loss of capital in the stock market but also assure you of income until your death.