Annuities Take the Mystery Out of Retirement Income

A stream cannot rise higher than its water source.  We already had a retirement crisis before the meltdown, what we have now is a real mess.  Last week the three major market averages retreated between 2% and 3%. 

For many Americans, retiring in this century is a mystery. Earlier generations of workers could rely on employer-provided pensions, but now many workers will need to rely on their own work-related and personal savings plus Social Security benefits. These savings have to last longer because Americans are living longer, often into their eighties and nineties.

When the bottom dropped out of the economy and our financial markets in latter part of 2008, it became clear that traditional retirement planning didn’t work for millions of Americans whose retirement security is at risk.  The financial crisis has caused many people to do irrational things with their money and make emotional decisions that may have been detrimental to their retirement plans.

The tradeoff for aiming for higher returns is taking on more risk, including the risk of losing money.  I do not know of  anyone personally who has “never lost” any money in the stock market. Security prices can fall, as we saw with stocks in 2000, 2001, and 2008. The difference between uncertainty and certainty; overspending, taxes, the housing market and healthcare — where the meltdown has had a significant impact on investors’ psychology and, ultimately, their retirement readiness. Corporate America is beginning to try the patience of some investors.

For today’s investor there are all kinds of venues to pursue. You have the choice of stocks, bonds, mutual funds, property investing, and many categories of each of these in between. One thing that I do know is whether you’re an optimist or a pessimist about interest and rates of return, being conservative in your estimates is safer; it is better to have extra money than too little.

One of the great mysteries in retirement planning is whether your spending will go down, go up, or stay about same.  Are you more optimistic about the future cost of living or have you resigned to a humbler lifestyle once the paychecks stop coming. Fear and anxiety are quite common emotions to experience when handling funds that will have such a profound effect on your future and that of your family. 

Women especially, need to be concerned.  One reason women need to get their finances under control is because no one will do it for them.  Whether they’re facing divorce, widowhood or caring for an aging parent, women have a much greater chance of being the lone provider and fending for themselves at some point in their lives. The days of just sitting back and letting your husband take care of the checkbook and living off his pension are long gone.

The origin of the word thrift means the grasping or holding fast to the things that we have. It implies economy and carefulness, as opposed to waste and extravagance. “He can who thinks he can, and he can’t who thinks he can’t.” This is an indisputable law of mankind.  Never allow anybody or any misfortune to shake your firm belief in yourself. You may lose property, reputation or even your good health; but there is always hope for you so long as you maintain a strong faith in yourself.

The miracles of civilization have been performed by men and women of great self-confidence, who had an unwavering faith in their power to accomplish any task they accepted.

Our world would be centuries behind what it is today had it not been for their grit, their determination, their persistence in finding and making real the thing they believed in. There is no law by which you can achieve success in anything without expecting it, demanding it, assuming it. There must be a strong, firm, self-faith first, or success will never come.

There is little room for chance in nature’s world of system and supreme order. Everything must have a specific expectation. No matter how great the ability; how large the genius; or how splendid the education, the achievement will never rise higher than the man or woman’s confidence.

“Nothing else will so assist you to accomplish great things as to believe in your own greatness.”   - Mirabeau

Do not worry too much about putting your money in one place. You can split it up so that you are investing into more than just one idea. This will help you earn more money and give you more income for when you retire. You will also notice that some of the investments that you are taking part in go up and down. This is normal.

You should not panic when you see that something is falling in the stock market. Usually it will go back up within a short time. All you have to do is keep an eye on it and make sure that it is not falling anymore than usual. This is a retirement planning secret that many people get all worked up about even though it is going to happen.  By putting a portion of your investments into a guaranteed income annuity, you are building a safety net that takes some of the mystery out of wondering if you will have enough to cover your expenses for your lifetime, Guraranteed!!! 

By putting only a small portion of your assets into an income annuity, (safety net) of income  you may generate more income than you could on your own. Plus, you can help manage market fluctuations and receive a guaranteed stream of income that you can use to cover basic expenses for the rest of your life. This could free up other financial resources, so you can do more of the things you enjoy.

An income annuity (sometimes called a longevity annuity) is a way to maximize your retirement assets. You can purchase one with a small portion of your assets…and get significant lifetime income payments at a specific time later in life. With an income annuity, you know how much income you’ll receive and when it will begin.

You can think of an income annuity as life insurance in reverse. With life insurance, you make a series of payments to an insurance company and eventually, your beneficiary receives a lump sum payment when you die. With an income annuity, you do the opposite. You make a single premium payment and either immediately or at some point later in life, you receive a series of payments that can last as long as you live.  Because of that, you are guaranteed to receive lifetime income and you may get more income than you would if you’d tried to invest it yourself.

If you have a qualified annuity, all of the principal and earnings you withdraw will be taxed at ordinary income tax rates. If you have a non-qualified annuity, just the earnings portion of the payments is taxed as ordinary income.

Each non-qualified annuity payment you receive will be a combination of taxable and non-taxable income. This is a good way to help manage your taxes on an ongoing basis.