Harvest Season – Retirement

Why look into annuities? If you’re a Baby Boomer with no pension but have money in an IRA or a 401(k), or most of your money in interest savings accounts, an annuity may be the key to a secure and comfortable retirement.

Workers who are approaching retirement today are less likely than those who retired 20 or more years ago to have a defined benefit pension. Those who have retirement savings in a 401(k) plan or an IRA will have to decide how to convert (Harvest) their retirement savings into retirement income.

Whether your goal is saving for retirement or you have already reached that goal and you want to be sure that you will never outlive your savings.  There are a number of ways to convert retirement savings into income.

One option is to purchase a -“Harvesting”- annuity which may be just what you are looking for in the withdrawal of your assets and could make a major difference in how long your money lasts. A life annuity—also called an immediate annuity—is an insurance contract that provides regular income payments for life in return for an initial lump-sum premium.

Try to determine how much you can reasonably afford to withdraw (Harvest) from your financial assets.  Life annuities can help protect retirees against some of the financial risks of retirement, especially longevity risk and investment risk. A life annuity pays income to the purchaser for as long as he or she lives, and in the case of a joint-and survivor annuity, for as long as the surviving spouse lives. You could spend two, or even three, decades in retirement. Keep this type of longevity in mind when you create investment strategies for your retirement.

One of the risks that you will face is the possibility that if they withdraw money too quickly, you might exhaust your savings while you still have many years to live. Income annuities insure retirees against the possibility of outliving your retirement savings.

It is very important not to spend too much in your early retirement years. Obviously, you don’t want to outlive your resources. During the first few years of your retirement, don’t go overboard on spending.  Also, be prepared for the unexpected financial issues relating to your family or your health that can crop up during your retirement years.  To prepare for them, make sure you have set aside adequate “cash” reserves in easily accessible accounts.

Note:  Some annuities offer limited protection against inflation through annual increases in income; however, the annual increases must be paid for by accepting a lower initial monthly annuity income.

One More Consideration to Consider: ”The Life Expectancy of Insurance Companies!”

As it turns out, here in the United States, insurance companies have had great success staying in business. Even when one fails, the policy holders are protected because each state has a fund that takes over the policies and parcels them out to the solvent insurance companies in the state. I won’t go into the particular details because each state has their unique procedure. Suffice it to say, when your contract is transferred, the new company will honor the terms of your contract as if they had been the original issuer.

Most people don’t know insurance companies are regulated not only by state and federal laws but also by IRS code sections. These code sections are what allow you and I to receive annuity payments at generally favorable rates. For the purist, we get favorable treatment through a code section that created something called an exclusion ratio. Tax deferred interest, as you might guess, has advantages over taxable interest. Per the law, annuities pay tax deferred interest. That is sweet even to the most casual of investors.

In conclusion, you may want to travel and live without worries about money and enjoy the hard work and determination that was required in order for you to live comfortably. However, as time goes on, you’re guaranteed to age and that is why it is very important to have a superior retirement investment plan in place.