Here They Come!

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All the big banks you have heard of like Bank of America, JP Morgan, Chase, and Wells Fargo are adding staff, creating easier-to-use technology, and competing on fees in an effort to win a bigger share of the trillions of dollars in 401(k) savings plans. JPMorgan almost doubled its sales force dedicated to selling retirement plan services to employers in 2010. This has become a top priority of JP Morgan.

Americans held $2.9 trillion in 401(k) plans as of September, and the total may reach $4 trillion by 2015, according to Cerulli Associates, a Boston research firm. Increased competition from banks may lead to lower costs and more choices for employers and savers, says Laura Pavlenko Lutton, an editorial director in the mutual fund research group at Morningstar.

Banks are scrambling for new ways to make money after losses on mortgages and increased regulations have curbed their revenue sources.

As all of these banks are upping the ante on the retirement market. What does this mean for you and your retirement? As a consumer you need to look at the bigger picture. In the last decade many uncertainties have come into play.

These big banks know everyone is scared and unsure of the future at this point. No one wants the fear of not being able to retire or the fear of running out of money at an old age. You do have many options to choose from when you are ready to get your retirement started, but not all will be a fit for you.

Due to the market volatility and the low interest rates at the bank, you have a few options to rule out right off the bat. When looking at fixed annuities the options are endless as well. But you have two added benefits, your principal is always safe and the rates are higher than the bank. Now you have found which vehicle to look at, you get to decide what options you need. this will depend on your current situation along with what you would like your future situation to be.

Baby Boomers Falling Behind-

Last week the Fed issued a gloomy prognosis.  Even if the US economy began to grow at a rate more typical of recoveries than the current anemic 2.5 percent, unemployment won’t drop to its pre-recession level for five to seven years. 

In reality, the bad economy is likely to continue for most Americans beyond seven years – maybe for 10 or more – because of chronic lack of aggregate demand.  So much income and wealth have now concentrated at the top and the broad middle and working class no longer has the buying power to get the economy going again.

Especially hard hit are the baby boomers that are at or near retirement. 

 According to a report, 58 percent of boomers say they are falling behind because “the bar is constantly rising” in terms of the basic necessities of life. Many boomers not only saw their retirement portfolios shrink, but they compounded the problem by refinancing their homes during 1990s and early 2000s.

 Searching for a way to protect your already-hammered retirement portfolios, conservative investors are focusing in on annuities in increasing numbers these days. Especially in this tough economic environment, you want to entrust your money to a carrier that knows what they are doing.

Be sure you are working with a financial professional who can offer all the major categories of annuities, including; immediate, fixed and indexed products, that way you know you will be guided into the right option for you.

 There are great perks of each type of annuity, immediate, fixed and index annuities offers: Security-lifetime income guaranteed, Simplicity –you know what you are getting into.  

High Returns – the interest rates used by insurance companies to calculate immediate annuity income are generally higher than CD or Treasury rates,

Preferred Tax Treatment – it lets you postpone paying taxes on some of the earnings you’ve accrued in a “tax-deferred”

Safety of Principal.

• With Immediate annuities you start your guaranteed income immediately.
• With a fixed annuity you get a very stable retirement financial plan. You know beforehand how much you will be receiving regularly and the interest rate applied to your investment is constant.
• Lastly with Index annuities, the insurance company hedges the performance of the outside index. So, if the index were to go up, you’re going to get a positive interest credit to your annuity. Whereas if the index were to go down, you’re not going to get any index credit, but you’re also not going to lose any money, you only get the upside to the market.  

 In the darkness of our economic situation the last thing you want to have to worry about is losing you hard earned principle when all you want is to provide a secure future for yourself. Just keep in mind there is always sunshine in the future after a gloomy forecast; you just need to know where to look.

Crazy Times! Where to Turn?

If the first year (of economic recovery) is any indication, it could be a long, slow road ahead.  At a time when income growth is weak, the unemployment rate is high and a double dip in house prices is underway. 

Economists watch confidence closely because consumer spending accounts for about 70 percent of U.S. economic activity and is critical to a strong rebound.

The Consumer Confidence index, which measures how respondents feel about business conditions, the job market and the next six months, has recovered fitfully since hitting an all-time low of 25.3 in February 2009.

By October 2009, it had risen to 48.7 and has since hovered in a tight range between the mid-40s and the high 50s. May 2010 was the only month when the index topped 60. 

Annuities can be used as wonderful retirement tools and income planning more today than ever before. With all of the crazy economic news in the world, annuities can prove to be valuable in uncertain times. In order to make a sound financial decision regarding where to place your hard earned dollars.

Annuities have lately become some of the most popular investment options available to many people, especially among retirees and people who are prudently preparing for their retirement. The beauty of annuities is that the annuitant is assured of a continuous stream of income for the rest of their life. In some types of annuities (like the fixed-return annuities) the annuitant doesn’t even have to be bothered about the performance of the investments the money used to purchase the annuity is put into.

This can be particularly attractive when you are in retirement and don’t want the hassle which managing investments can be. With annuities, all you have to do is cash the regular annuity check. The insurance company or other financial institution offering the annuities absorbs some or all of the risk for the investments on your behalf. This is a great reprieve because as we all know, all investments comes with an element of risk.

Annuities are also known as a pension plan as one of its useful features is to generate money in post retirement period. It is the greatest problem solving option for an senior person for whom there is a constant fear of financial crunch. Annuities are one of the best saving options, in the sense that it very efficiently manages individuals savings and investment, and is sometimes considered to be even better than Mutual funds, stocks, bank CDs, etc.

Therefore Annuities are a wonderful solution when the crazy economic times get you thinking and contemplating what is a safe and logical move when nothing is certain anywhere else.

Will Boomers Outlive Their Savings!

Due to the world’s changing economic climate issues such as increasing fuel, food and health care costs have many now thinking, “is my future going to be worry free or just plain worrisome”.  It certainly appears that many of the rules that we previously took for granted have changed and are currently in the process of being rewritten.

As those in America who have just been reminded again (Fannie Mae & Freddie Mac) as elsewhere, many people entering their golden years have been affected by the failures of banks, finance and investment companies as well as seeing their hard earned home equity diminishing.

The ups and downs in today’s economy have taken a toll on savings you’ve put away for retirement especially if you heavily invested in stocks.  A wobbly economy, low interest rates and cautious investors are the perfect conditions for looking at indexed annuities.

There are few investment options that can provide you with a source of regular income in your retirement years. One of these options, and a highly dependable one, is an annuity.  An annuity is one of the most recommended retirement planning investments.

An income annuity is known as a type of longevity insurance which pays money like a pension fund in retirement. It can guarantee a regular source of fixed income for any individual in his retirement years. When you want to feel more certain about your financial future after retirement, an equity income annuity is an excellent investment strategy.

The equity income annuity is a great way to increase your wealth while taking full advantage of stock market performance simultaneously.

Equity income annuities have gained in popularity over the years from baby boomers looking for ways to increase their retirement funds and budget during the years after they retire. The equity annuity can provide stability and certain income over these years, extending to cover a spouse and even protect an heir years after the initial investor has passed away.

These benefits are incredibly attractive to individuals looking for a conservative, sure-fire way to invest their savings in way that makes sense to retirees and their families alike.

An equity income annuity is different from its annuity counterparts because it is closely tied to a specific equity market, often the S&P 500. By pairing itself with this market, the annuity will offer additional interest to its investors based on the performance of the agreed-upon market.

With an indexed annuity, you have the potential for upside, because your investment earnings are directly correlated with the performance of some outside equity index such as the S&P500. So you have the potential for investment earnings, but if the equity index doesn’t perform positively then there is no downside risk. So, there’s no potential to lose money like there is in a mutual funds or stocks.

For example, if the annuity is tied to the S&P 500 and this market performs well quarter after quarter, the annuity will enjoy a higher rate of interest each quarter.  The interest will be put into the initial investment and since the annuity is tax-deferred, the investment will continue to grow at an aggressive rate. This additional interest will compound and expand the investor’s initial principle over time.

But what if the market struggles? Can the investor lose their investment during these lean times in the marketplace? Not at all. In fact, every equity annuity guarantees a minimum interest rate so that even when the market is dropping significantly, the annuity investment will still see a gain, albeit a slower growth than if the market was performing better.

Regardless, the annuity investment continues to grow over this time. Many investors explain the equity annuity by saying it’s like getting all the benefits of strong market performance without having to struggle during the times when performance drops. You can have your cake and eat it too.

An Equity Indexed Annuity with an Income Rider is a contract between you and the insurance company which provides:

• Guaranteed return of principal,
• Returns linked to an index (subject to a cap),
• Credited gains cannot be lost,
• Guaranteed minimum interest,
• Liquidity features (nursing home, critical illness & 10% annual withdrawal),
• Taxes not due until withdrawal,
• Avoidance of Probate,
• Protection from creditors,
• No annual fees (other than the cost of the rider depending on the carrier) and
• guaranteed income you (or you and your spouse) cannot outlive.

In conclusion:  How is there no potential to lose money? How is that guarded against?  The insurance company hedges the performance of the outside index. So, if the index were to go up, you’re going to get a positive interest credit to your annuity.

Whereas if the index were to go down, you’re not going to get any index credit, but you’re also not going to lose any money.

Your principal is guaranteed against market risk from day one and your interest gains lock in each year on your contract anniversary and cannot be taken away in future market downturns. In other words, you can participate in a percentage of the upside of a major market index, but you are never exposed to any of the downside market risk!

As more people are approaching retirement, they’re definitely interested in securing a guaranteed level of income through retirement. Whereas 3, 4, 5 years ago guaranteed living benefits were not prevalent on indexed annuities, now they are prevalent on indexed annuities. So, to layer some type of guaranteed income protection on top of a vehicle with no downside risk certainly is a great combination for a lot of boomers.