ANNUITY INCOME FOR A STRESS FREE RETIREMENT
Predictable and guaranteed future income.
Annuities
Annuities are not for everybody, but they are the correct retirement vehicle for many of us. An annuity is a conservative investment that is typically secured by a person who wants to have guaranteed payments for the rest of their life. Once the initial deposit is made, a rate of return is guaranteed for a specific length of time. The money is safe from market risk, with the future income being predictable and guaranteed.
Upon one’s death, the annuity’s accumulated value is passed to the named beneficiary. Importantly, this money bypasses probate which simplifies and speeds the transfer.
Annuities can be funded over time through regular payments (a deferred annuity) or funded via a single payment or roll-over deposit (an immediate annuity). The primary advantage of an immediate annuity is that it prevents the retiree from outliving their retirement nest egg, a serious potential problem for stock market investors where one event can wipe out a person’s retirement funds.
Annuities can also be short-term (1-5 years) or long-term (6-10 years). Both types offer the same advantages, but long-term annuities provide higher rates of return (perhaps 3%-7%).
Keep in mind: if a person feels that they need to experience the high returns that the stock market can sometimes provide, then they are not likely the type of person who will buy an annuity. However, if a person feels that they simply cannot afford to lose money in the market, they’re likely to be enticed by the slow and steady guarantees of an annuity.
The Benefits of Annuities
Annuities have a distinct advantage over other income-producing assets: the gains are not taxed, which allows for the magic of compounding to really make a difference in an annuity’s account value. Stock dividends, mutual funds, real estate and C.D.’s all create income that is taxed as regular/ordinary income. Picture in your mind Uncle Sam picking your pocket every time you make a gain with these taxable investments. However, an annuity’s growth is not taxed until it is converted into an income stream. This makes a huge difference in the growth of the account.
One type of annuity that we offer to our clients is a Fixed Indexed Annuity that is linked to a market index (such as The Standard & Poor 500 index) but is not directly invested in the stock market. Fixed Index Annuities provide much of the gains the market might provide yet also guarantee that one can never lose money. It’s a guarantee that neither the contributions/funding nor any gains the annuity annually accumulates will ever lose a dime. So, while the stock market often forces investors to recover their losses before they start winning again, a Fixed Index Annuity never has to recover from a loss.
Yes, there will be years where the annuity will earn nothing, but this is where “zero can be your hero.” Remember Warren Buffett’s two rules of investing…the first rule being, “never lose money” with the second rule being, “never forget rule number one”. This is the mentality that a person needs to have when buying an annuity.
Despite these distinct advantages, annuities are often panned by financial planners and money managers like Ken Fischer. Why is that so? It’s because the financial planners are paid an annual percentage fee to manage the money. The higher the asset value might be, the higher the fees. However, annuities are offered by insurance carriers, so a financial planner can’t make a profit if the money has funded an annuity. This may be the most significant reason why money managers and financial planners don’t like annuities.
Another reason many financial planners advise their clients not to buy an annuity is that “it locks up their money” for the long-term. It is absolutely true that an annuity is a long-term vehicle, but it is not true that a person owning an annuity cannot access their money. Almost all annuities allow the owner of the annuity to draw down up to 10% of the principal each year during the growth period.
In short, a fixed index annuity is one of the safest vehicles one can choose to accumulate and grow money. It provides peace of mind, security and a steady flow of income that you can never outlive. It also can be structured so that it takes care of a surviving spouse, as well.
Give us a call if you want to discuss if an annuity is right for you.
Ready to Learn More About Annuities?
Contact us today for a no obligation introductory meeting so that you can tell us what your goals are. Start by filling out our initial questionnaire. Once we connect, we will send you a FREE copy of the best selling book on properly structured annuities, Stress Free Retirement by Patrick Kelly, or you can choose either of the other bestsellers on tax-free retirement through the vehicle of life insurance.
**If you are more interested in learning about tax-free retirement opportunities, please visit our Tax-free Retirement page.
Ready to Learn More About Annuities?
Contact us today for a no obligation introductory meeting so that you can tell us what your goals are. Start by filling out our initial questionnaire. Once we connect, we will send you a FREE copy of Stress Free Retirement by Patrick Kelly about annuities, or you can choose either of the other bestsellers on tax-free retirement through the vehicle of life insurance.
**If you are more interested in learning about tax-free retirement opportunities, please visit our Tax-free Retirement page.
