Archive for the 'Annuities' Category

How to Increase Your Social Security Benefits

Benefits of Waiting to Claim Your Social SecurityWinning Couple - Isolated

The New York Times, November 15th, 2013

For many who are over the age of 62, collecting your Social Security benefits is a rite-of-passage of sorts, the payoff of your years of letting the IRS take your hard earned money out of every paycheck.  For some, particularly those who have already retired or who don’t work, they can’t wait to start collecting it when they first become eligible at the age of 62.  But did you know that there could be benefits for waiting to start collecting it?

Much like an annuity, your Social Security can give you some guaranteed income for life.  But unlike an annuity, it doesn’t require you to put down a large sum of money up front, as your large sum of money has already been accumulated over the years from your paychecks.  However, the amount that you can begin to collect at the age of 62 (you can start accessing it anywhere between the ages of 62-70) is hardly enough for you to live on.  Click here to learn more about how waiting to start collecting your Social Security can get you a higher amount of guaranteed money for life.

Can an Annuity Help You Generate More Retirement Income?

Closing the Retirement Income Gapimg_supplemental_drugs

PBS Newshour, November 2013

The difference between a safe annual retirement income and basic retirement expenses is known as the retirement income gap.  Facing an alarming decrease in American workers who have a pension to count on, many people approaching retirement age are wondering where they are going to be able to find the money to live comfortably.  Where do you turn if you discover your 401k plan and Social Security will not generate enough money for you to enjoy your golden years?

Two good answers to this question, a reverse mortgage or an annuity, unfortunately both seem to have a fairly negative public opinion.  While it’s true that there are plenty of horror stories about either topic, there are likely just as many stories of people utilizing them properly and successfully.  We’ve covered reverse mortgages many times in this blog, so let’s focus on annuities.  For example, have you ever heard of a Single Payment Immediate Annuity before?  Did you even know there are different types of annuities available?  Read the article at the link listed below for more information about the potential benefits of annuities.

http://www.pbs.org/newshour/businessdesk/2013/11/what-if-you-outlive-your-savin.html

What Are Your Healthcare Options?

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Healthcare is again in the news and many people are feeling confused by the amount and variety of information being communicated. Here is what you need to know about Medicare, Obamacare and Medicare Supplemental insurance.

  • Obamacare: Obamacare is the commonly used name for the Affordable Care Act.  This act is designed to make healthcare affordable for everyone and extend coverage to those that do not have it today.If you are already eligible for or receiving Medicare, it does not change your coverage or costs. Likewise, if you are insured by an employer, Obamacare does not apply to you either.

    However, if you are without insurance or are self insured and under the age of 65, then you may want to explore the Affordable Care marketplaces. There could be an insurance plan that meets your needs. This may be of great interest to many older Americans who retired before the age of 65 and are now living without health insurance due to the expense or because they were previously denied coverage because of pre existing conditions. The Affordable Care Act is designed to meet the needs of people like this group.

  • Medicare: Medicare is a government run insurance program for people 65 and older. Almost everyone 65 and over enrolls in Medicare Parts A and B which cover basic medical care.
  • Medicare Supplemental Plans: Medicare Parts A and B do not cover the costs of all medical needs. Many older Americans opt to sign up for additional coverage with a Medicare Supplemental Plan. There are many different plans. It is important to evaluate your supplemental coverage each year to minimize your out of pocket healthcare spending. As we mention below the Medicare Supplement Open Enrollment begins shortly.

Time to get Ready for Medicare Open Enrollment!

The open enrollment period for Medicare will begin Oct. 15. It is important to note that Medicare open enrollment is different from the Obamacare Marketplaces which open  Oct. 1. If you are covered by Medicare, you do not need to think about Obamacare.

The Medicare open enrollment is the one time of year that Medicare beneficiaries can switch plans, including choosing a Medicare Advantage (Part C) plan instead of original Medicare (Parts A and B). Many Medicare recipients find that they can save money and improve coverage by switching or adding Medicare supplemental coverage.

We recommend that all Medicare beneficiaries get answers to these questions EVERY year during the open enrollment period. Ask an insurer:

  • Have there been any changes to your current coverage?
  • How do changes in your health status or prescription needs impact your out of pocket spending?
  • What will your current coverage cost this year vs last?
  • How does health care reform improve your coverage?
  • What are the alternatives to your current plans?

Delay Social Security for more income

Deciding when to start drawing Social Security can be one of the toughest decisions that a new or near retiree can make. For most, delaying Social Security is the preferred option — in fact, it may your best investment decision.

By Henry Hebeler

Henry (Bud) Hebeler is one of the most experienced financial advisors within NewRetirement advisors’ network. Henry recently has published an article on Market Watch website about how delaying the age of claiming your social security can result in more lifetime income. The article also includes a real case study of Henry’s friend. To learn about more details, please read the article Delay Social Security for more income.

 

 

Annuity Options are now Incentivized

According to an article by BusinessManagmentDaily, the federal government wants to give retirement plan participants more incentives to invest in annuities. In fact, the IRS and Treasure Department have proposed a new package of regulations and rulings that intend to offer incentives for investing in annuities. In addition to these incentive-based regulations, the required minimum distribution rules will be loosened so retirees can use part of their IRA or 401(k) balances to buy longevity annuities, which begin late in life—typically, at age 80 or 85—so premiums are cheap and the retirees don’t have to worry about outliving their savings.

Have any questions about calculating annuities? Use our Annuity Calculator for free!

 

Annuity Confusion

One of the most confusing to understand yet potentially one of the best ways to invest your money is in an Annuity.  An annuity is like a pension that you buy for yourself.  You purchase monthly income for a specific period of time for as long as you live.  This sounds great, but not all annuities are created the same.  Attempting to figure out which annuity is right for you can be a daunting and confusing task.  Not all annuity products are the right thing for certain retirees and attempting to chose between fixed and variable annuity or even where to purchase an annuity can be downright frustrating.

One of the blogs we like to keep up with over here at NewRetirement is Tom’s Blog. He is the founder of Annuity Digest and writes a blog that deals with questions on annuities as well as other financial topics.  When thinking about purchasing an annuity, you can never have too much information!

Check out our Pro’s and Con’s of Annuities list.

Use our Retirement Calculator to see where you stand in your retirement planning with or without an annuity.

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Should You Buy an Annuity With Your Retirement Savings?

Do you think it’s a wise idea to take part of your retirement savings to purchase an annuity?  That’s what the US Government Accountability Office (GAO) recommends.  People are living longer and it’s no secret that Social Security is nearly impossible to live on as a primary source of income.  The GAO interviewed financial experts who recommend that in order for retirees to cover the expenses they may encounter further down the line, they should delay Social Security benefits, work as long as possible to continue to save and to systematically draw down their savings to purchase an annuity.

Do you agree with the GAO’s recommendations for purchasing annuities?

Read the GAO’s full report, here.

See some FAQ’s on annuities and get some answers.

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Variable Annuity Worth Considering

American Chronicle, February 17th, 2011

Q. I am 47 years old and bought a house when I was 42 (30-year mortgage
at 5.12 percent). My job requires me to retire by 65 years old (police
officer), but I can retire as early as 57 years old. My mortgage won’t
be paid off until I am 72 years old. I have extra cash at the moment
(currently in a 1 percent savings account) that I have been debating on
investing in stocks or paying my mortgage principal down. What would the
wise choice be?

If we’ve learned anything from 2008, it’s not to be
over- leveraged. The historical return of the stock market at 9 percent
to 10 percent would suggest you could do much better in stocks –
especially if capital-gain rates stay at 15 percent — but let’s not
forget that during the last 10 years the Standard & Poor’s 500 was
flat. The math may work, but the certainty of return is not there.

Personally, I like the discipline of paying down a mortgage. If you
were to pay down your mortgage let’s say $100,000 on a $300,000 mortgage
at 5.12 percent, you would save about $153,000 over the life of the
mortgage.

You could, however, consider an investment strategy
that offers a guaranteed return or principal protection such as a
variable annuity. Let me briefly describe one general type of variable
annuity in which the amount invested, say $100,000, is guaranteed to
adjust (reset) annually at either 8 percent more or the actual account
value, whichever is higher.

The $100,000 in the variable annuity
is invested in a portfolio of mutual funds that diversify your
investment. On the anniversary date of the investment, the insurance
company looks at the account balance. If it has appreciated less than 8
percent or even lost money, your annuity base for calculating future
withdrawals is increased by 8 percent on your initial investment to
$108,000. If we had a good market that year and the account was up 15
percent or at $115,000, this higher amount is locked in and becomes your
base for applying the 8 percent, so the next year the annuity would
increase by $9,200 ($115,000 x 8 percent) to $124,200.

On a
$100,000 investment, assuming the market never beats the guaranteed 8
percent rate, the account benefit base will grow to about $196,000
($100,000 plus $8,000 per year over 12 years).

Depending on your
age when you start withdrawing the money, the insurance company will
guarantee you either 4 percent at age 62 or 5 percent at age 65 of the
benefit base (i.e., $196,000) or $7,840 at age 62 (or $9,800 at age 65) a
year for the rest of your life. It is important to understand that the
benefit base of $196,000 is available only as a withdrawal benefit. You
can, however, opt to withdraw the account balance of your mutual funds
at any time (subject to surrender charges usually in the first four to
six years).

Read more of this article.

Annuity advice for retirement:  Annuities are hardly the proper solution for everyone, but they do have a place in reputable retirement planning.  Find out how much it can assist you at NewRetirement.com

Dad and an annuity

National Public Radio, November 22nd, 2010

Question: I am fortunate that my retired parents are
financially independent. My father will be required to start taking
minimum distributions from his IRA starting in January. His broker has
recommended that he instead take a lump sum of money from his IRA and
purchase an annuity that will pay out a certain amount each year. The
annuity premiums can be taken from this amount thus reducing the taxable
amount of the payout. The annuity would also have a fixed death benefit
payable when both of my parents die. Crunching the numbers, I see a
small tax savings this way, but the whole thing seems too good to be
true. Can you see a downside? Thanks for the advice. Robertta,
Prattville, AL

Answer: The world of annuities is almost infinitely
complex. There are countless variations and shades of annuities. It’s
also a product that is often sold, rather than bought.

My response depends on what kind of annuity the financial advisor is
recommending. The advisor may be suggesting an “immediate” annuity? if
that’s the case it can be a good strategy. The downsides include low
interest rates, losing flexibility with the money that is annuitized,
and the time it takes to properly analyze the product.

Your father can buy a measure of financial safety
and financial comfort with an immediate annuity. He’ll want to do
business with a blue chip high quality company. He’ll invest a sum of
money and get a predictable monthly income (or quarterly or annual
depending on the chosen payout option) on the investment for the rest of
his life. He can’t outlive the investment or the income.

I favor inflation-protected immediate annuities. Right now, inflation
is tame and I am a long term optimist on the price level. But what if
inflation does take off? It erodes the value of savings over time.
Inflation is the big risk all retirees face (all long term savers for
that matter), especially since so many people are living longer these
days. Your father will get a lower payout if he takes the inflation
rider, but it’s a worthwhile hedge.

Henry Hebeler of Analyzenow.com also
suggests these annuities should be laddered to hedge interest rate risk
and so that your father will receive larger payments as you age.

Read more of this article:

Annuity advice for retirement:  Annuities are often used as inflation hedges, as described above, but lock up your savings in a rigid form and reduce your overall liquidity.  Consider whether one is the right move for you at NewRetirement.com



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