Take the Annuity Highway
Financial independence in later life does not come from how much is earned but from good money management. It is never too early or late to start a good retirement plan.
There is a big difference between “making a good living” and “enjoying a good life”. Making a good living refers to a person’s earning capacity – whether it is in a profession or business. Enjoying a good life on the other hand is how the money is spent. Money can be spent in various ways and the two most common ways are:
- Spending on luxuries with no savings, and
- Living comfortably and putting some aside for a “rainy day”.
Making conscious and deliberate choices about how the money is spent is the basis for a financially independent life in retirement. The four key elements of sensible money management are:
- Giving priority to savings. “Pay yourself first” is a common edict. Set aside a sum of money as savings to use to create wealth.
- Living within one’s means. That is buying only what one can easily afford.
- Invest wisely. Money in a bank account earning minimum interest will not help to create wealth. It has to be invested in assets that grow in value over time.
- Using some of the money to make a difference. Being grateful for what one has and showing that gratitude by helping those who are less fortunate.
Do you know what most small businesses do when times are bad? They hunker down and hope things will just get better. Even when the economy was thriving and banks were throwing money at people and businesses, there were companies going broke everyday, because they just carried on doing what didn’t work and hoped that things would magically, just get better.
Things didn’t just get better back then and they certainly won’t today…in one of the worst economic periods in living memory.
Financial Intelligence & Freedom can have a lot of different meanings, unique to each person. However, for most people the term suggests having no reliance on others when it comes to one’s financial wherewithal. There are two situations that can happen when you have financial intelligence & freedom. It is either you take control of your finances or you let your finances control you. You see the essence of managing your own finances.
The great depression of 09 was a searing experience, like inflation was in the 70’s it will affect the way people behave. In the 90’s there was a lot of articles about thriftiness and saving, and it didn’t happen. We rolled on. These days, you don’t talk to anyone that isn’t fearful of being unemployed in a way that’s different than it was even a couple of years ago.
Do you think you will ever build financial freedom if you keep doing the same things you have always done? If you do not do something different than you have done in your past you will have the same results in your future. You must make a decision right now that you are going to break out of that self-fulfilling cycle of limited results and frustration.
Recessions accelerate social change. A lot of people looked around their homes and said, “Why do I have all this stuff!” You start distinguishing between foolish debt and wise debt. This is where this past year experience we’ve been through starts to effect people. They’re going to make conscious tradeoffs. If you want a big, good looking car, you’re going to cut back someplace else as opposed to just keep borrowing, which is what was happening in the 2000’s it was almost as if we were avoiding trade-offs by borrowing.
Financial education- knowing how to make money, knowing what to do with money once you have it, knowing how to keep people from taking your money away from you, knowing how to keep your money for the long term, and knowing how to make your money work for you- is of vital importance in the quest to achieving financial freedom.
Removing water from one end of a swimming pool and pouring it in the other end will not raise the overall water level – no matter how large the bucket. People are too focused on the short term ups and downs of the market. They want to hold the asset when it seems like the stock market is going up and the want to sell it when the stock market is going down. This is why the average investor is constantly behind the eight ball. People have a deer in the headlight looks because they don’t want to assume any risk. They need to recognize that in order to extract a better return, they need to tolerate some risk.
Becoming educated about your finances will play a major role in your financial future. Knowledge is a very powerful tool and therefore you should strive to enhance it to the best of your ability. Many people ignore or just think they know everything there is to know, and this is where failure begins, so the better your financial knowledge is, the easier it will be to get there.
Retailers are teaching their sales associates to not say, “May I help you?” to “Can I help you FIND something?” It’s a subtle method retailers employ to get consumers to consume. Retailers have done studies into the impulses that make us want to buy, and how they can exploit those impulses. It is remarkable the lengths retailers go to find our B-Spot, as we call it, our “Buy Impulse.” If there is a will to shop, there is a way to shop. The urge to splurge!!
We need a new frugalism, we need a more mindfulness, which is we needed to think more about the inherent value of things we buy, at whatever price. Even if it is expensive, we expect it to last longer than we might have a couple of years ago.
Our great recession has made people want to change their spending as too much debt and the accumulation of unneeded things have soured shopping for shopping’s sake.
Find Financial Freedom. Everyone is different and will undertake their road to success in their own way. I have always believed if you’re going to do something, do it well and don’t look back.
If you’re about to retire and want an income you can’t outlive then you’d be wise to buy annuities to supply a lifetime of income. Annuities offer a great deal of diversification in your portfolio if you select an equity indexed annuities. If you fret too much about market conditions, these products also have guarantees.
For those that simply want an interest bearing product then a fixed annuity might be just to their liking. Fixed annuities work very much like bank CDs. The difference between the two is simple, tax deferral of the growth. Retirees and those about to retire in a higher income bracket benefit from sheltering their interest growth from taxation.
If you’re a retired senior on social security, you know there comes a point when your income exceeds the limit and you have to pay taxes on the second half of your social security. Buy keeping the growth of your dollars in a tax-sheltered product; you could save hundreds of dollars each year by not only sheltering that growth but also keeping your income under that fine line that triggers even more taxation.
People often buy annuities for more than just the tax break they receive. The products are also good investments. People often prefer Equity Indexed annuities to mutual funds because of the vast number of fund families represented in the index selected. If the purchaser changed fund families outside the annuity, he would have to pay a new load each time he made the change.
Of course, each change would trigger a taxable incident. While the equity indexed annuity owner eventually has to pay taxes on the growth of the annuity, the taxation process is a lot simpler. The mutual fund owner has to fill out the laborious capital gains form. This means that he must track every transfer he makes, including date, purchase and sale price.
At tax time, he must fill in the ominous form that brings grown men to their knees and makes women weep. Even accountants aren’t impervious to an occasional swear word when it comes to capital gains on mutual funds. The annuity owner, however, simply reports the gain shown on the 1099.
When you buy annuities for an immediate income, you have a lifetime of income no matter how long you live. While it is a comfort to know that each month you’ll receive another check, it also is a benefit to getting older. The longer you live, the more you make on your investment in the annuity.
If you buy annuities to pass money on to heirs, you have a choice on who receives the funds. Unlike wills, heirs or want-to-be heirs can’t contest beneficiary designations as they can wills. This means a disgruntled family member won’t be able to tie up the assets and keep them from the rightful owner.
