Annuities Solve Senior Crisis

The economic downturn is causing a crisis for seniors.  There are several crisis points, including the absence of defined benefit income, sharp decline in retirement funds, curtailment or loss of retiree health insurance, staying healthy and active despite everything.

Perhaps it is because savings and money are considered the most important parts of retirement…or perhaps it is because the current economic state has caused people contemplating retirement to think about finances before anything else.

 A good start is to ask yourself how much of your expected retirement expenses you want to cover from guaranteed sources of income like a pension, Social Security and annuities. There’s no official correct percentage, but one strategy is to cover as much of your essential expenses — housing costs, food, basic transportation — as possible from secure sources. That way, you know that, whatever else happens, you can maintain a minimum acceptable standard of living.

Seniors generally have three main goals – accumulating assets, distributing assets as income – efficiently transferring assets to heirs.

 Accumulation:   It is best to accumulate assets on a tax-favored basis.  Annuities work well.  For Seniors, the fixed, multi-year guarantee or consumer friendly fixed indexed annuities give an upside potential while eliminating or limiting downside loss.  That’s the key because reducing risk is of utmost concern today.

Remember that as you approach retirement — and certainly once you’re retired — an all-equity portfolio can be pretty risky. If the market takes a dive like it did last year — or drops by even half as much — a portfolio invested entirely in stocks could get whacked pretty hard, and may have trouble recovering and thus jeopardize the chances of your savings lasting throughout retirement.

Here’s the bad news: The easiest way to improve our retirement outlook is to work a couple of years longer than we planned. That’s a bummer for sure, but much better than falling short.  Working helps your money work and is the quickest way to increase your odds of getting to your savings goal, and as it turns out, is to work an extra year or two.

Income Distribution: The most important feature over the past few years has been the ability to provide an income stream, either on a level or increasing basis.  Consumers who are looking for maximum distribution advantages now have some tremendous annuities from which to choose.  Annuities are providing customers a customizable solution to fit their needs.

In order to bridge the disparity between the amount of retirement income you are set to receive and the amount you actually need, look towards an annuity.  Unlike savings or other investment options where you are unsure if they will last as long as you need them, an annuity can pay you for your entire lifetime.

Annuities come in many variations, some of which (make that most) can get pretty complicated. But an immediate annuity is the easiest type to understand. You hand over a chunk of money and in return you get a guaranteed monthly payment for the rest of your life (or, if you wish, as long as you or your spouse is alive).

Wealth Transfer:  If a senior is insurable, life insurance is the perfect vehicle to transfer wealth on a tax-advantaged basis.  Products offering full or simplified underwriting, tax-free death benefits, and perhaps even coverage for long term care expenses, and/or a guaranteed return of premium are certainly consumer-friendly.

Here are a few things to keep in mind…

- Choose a annuity that will guarantee your payouts will never go down… but leave plenty of upside for your payouts to increase.

- Choose an annuity that will give you payouts for life, not over a fixed term. This will give you maximum peace of mind.

- Add a “death benefit,” which guarantees you and your heirs get at least what you put into it.

- You can put as much as you need to cover your basic retirement expenses (after your existing pension or Social Security), but you should still keep plenty of money outside of your annuity to have funds on hand.

Again, depending on your age, your needs, and even what state you live in, your choices and guarantees are different.

Few Americans have considered annuities… But they’re an incredibly safe solution for lifetime income. Unlike stocks or mutual funds, there’s no guessing about how much income you’ll have or when you’ll get your money.