Retirement Annuities Or Work

Workers born before 1939 generally set 65 as their expected retirement age. With the rise in Social Security rules to receive full benefits, workers younger than that generally are considering 67 as their retirement age.  The poor economy or changes in their employment situations are the reasons most often cited for planning to work longer.

The biggest danger to many retirees, financially speaking, is longevity—living to 100 on savings that were only meant to last till you were 80. 

Retirement time is supposed to be a one of relaxation, family enjoyment, and taking care of oneself.

A retiree should never be in a situation where he or she is supposed to work long hours to make a living. However, many people who retire do not have any other choice and have to work all day long in order to survive financially.

News out this week shows that 29% of those who have already retired have saved nothing at all to support themselves, while only a third have saved at least $50,000.  According to the latest annual retirement survey from the Employee Benefit Research Institute, a nonprofit think tank in Washington, two-thirds of those in retirement don’t even have that much set aside.

A whopping 72% of workers age 60 or older are putting off retirement because they feel they can’t afford to retire.  The fact that baby boomers are now planning to work past the typical retirement age isn’t news. Many people have retired only to find that they cannot make a living from their retirement income.

This is a pitiful state of affairs at the tail end of the biggest financial boom in history. Today’s retirees lived through the incredible bull market that began in 1982. Bonds as well as shares skyrocketed. Most of them should be rolling in money.  Instead they were relying on … what?

Whether you are early in your career, actively contemplating retirement or already retired, you may need help to ensure you have the resources you need for the retirement lifestyle you want. It is imperative to have a solid financial plan intact today in order to thrive tomorrow and increase your success rate for meeting retirement goals.

Most retirees will have to file “Chapter Heaven.” In other words, get more retirement income from your assets by leaving nothing behind. That can mean converting your retirement assets into an immediate annuity that generates a monthly income until you die, a strategy that leaves nothing for your survivors, but what other choice do you have.

Annuities are financial products offered by an insurance company, and allow tax deferred growth of the inside build of cash value. An annuity at retirement can pay an assured income for one or more individuals, in specified sum for entire life, or for specified duration.  For most people it’s the same as saving for retirement, except you buy a pension that pays out after you retire.

Generally speaking, annuities can be used to refer to the contracts in which there may be a series of premiums that are paid by investors in order to earn a series of payments for income from the insurer. Annuities are usually meant to secure income when the investors have to retire later in their life. To understand more about annuities, it may be wise to get to know the available types of annuity in advance.

During the first phase of the contract, all benefits are deferred, i.e. assuming your life continues, no benefits are paid. But when the trigger occurs – this may be a specific date or an event – the investment fund begins to make payments either to you or the person you nominated to receive the income. This payment can continue for a set period of time or during your lifetime. There can also be benefits paid to your dependents on death.

The first available type of annuity that is worth consideration is the fixed annuity. With this type of annuity, investors will be able to earn interest at a rate which is set during the period of the annuity accumulation. Yet, during the payment period, the income will refer to a fixed rate. But, one thing that the investors should keep in mind is that by “fixed”, it does not mean that the rate is not changeable any longer. Instead, it means that the contract is the fixed item.

The second type available is the variable annuity. With this type of annuity, the premiums paid by the investors will be stored in a different account. Then, it is up to the investors to determine how they want to invest, in terms or premiums. Most of the variable annuities, however, are invested in the form of mutual funds. There are also accounts meant for bond and stock investments available.  This one should be carefully considered, because of the additional fees imposed by the annuity company, whereas purchasing those investments directly makes more sense.

The last type of annuities available is the indexed annuity. How about an investment that promises to give you at least an annual percentage increase that’s equal to or greater than you could obtain from a CD, but can also grow at a higher rate if the stock market performs well. Is this just a fantasy or does such an investment exist?

With this type of annuity, investors are likely to earn income which is based on the external financial index. S&P 500 may be a good example for this. The annuity credited interest will be based on the formula linking to an underlying index.

It is also a common thing for the indexed annuity to have a guarantee in paying the minimum rate of interest and this will make sure that investors are not likely to lose the initial premium investment that they have made at an earlier time. If you were looking for almost the perfect investment, it would probably be one that has the potential for significant appreciation, but is guaranteed not to drop below its original purchase price.

You can’t run out of Social Security benefits, of course, since they’re paid monthly. But it certainly is possible to outlive your retirement savings. One way to minimize that risk is to take a portion of your retirement money and purchase an annuity, since a typical annuity pays you a monthly benefit for the rest of your life.

Annuities can be immediate, paying benefits as soon as the contract is issued, or deferred, where assets remain inside the contract for a number of years. Earnings are tax deferred until withdrawals begin.  When you buy an immediate annuity you will have to choose the term of the annuity, which will determine how long your guaranteed income stream will last. A term certain annuity will have an income stream that lasts for a specific number of years, whereas a life annuity provides guaranteed income for as long as you are alive.