Education Center

Education Center

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… Read More »

How to Create Your Own Private Pension

THE PROBLEM 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… Read More »

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… Read More »

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… Read More »

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… Read More »