Powered by Max Banner Ads 

Retirement Risk Reduction

The stock market is presented as the most attractive place for investors over the long term – beating out bonds and other low-risk investments. However, to earn those higher returns, investors face more volatility.  Before 2015, the stock market rose for six years in a row, despite many hiccups. Even last year, market averages set highs before sliding, and stocks are still in the red so far in 2016.

Given the recent volatility, one can’t help wondering whether the stock market is crashing.  When stock bubbles come to a head, they tend to make wild swings in both directions. In other words, they don’t just suddenly burst — it’s more of a drawn-out, up-and-down process.

This crazy, market volatility is pretty similar to what we see in the middle of a stock market crash. It is extremely difficult for investors to tell whether the market is in a bubble and, if it is, whether that bubble is bursting.

Many older investors simply don’t have enough time before retirement to risk a big loss.  Even investors who are confident they can earn superior returns from stocks may reach a point where they want to lock in some of their gains in case markets turn fickle.

There can be silver linings to a bear market. It might be a good time to shift assets.  If a plummeting portfolio has you headed into the “retirement at risk” zone, “it could be reasonable to bail, to lock in your income and avoid the risk that maybe the market will fall another 10%.  This is a big concern because for the first time in about seven years, investors approaching retirement may be facing one of their biggest financial fears: retiring into a bear market.

Now, retirees have to think about “sequence of returns” risk: If they are forced to make withdrawals early in retirement from a portfolio that is declining precipitously, there will be fewer shares left over to benefit when the market eventually goes back up. That, in turn, raises the risk they could outlive their assets.

To avoid the risk of an ill-timed market downturn, retirement investors should consider using some of their nest egg to purchase an annuity.  By adding guaranteed lifetime income, investors can be protected from future market declines while securing income to cover essential retirement expenses.

A type of fixed annuity called a deferred income annuity has been growing in popularity. It offers predictable, guaranteed lifetime income beginning on a future date the investor selects. As part of a diversified plan, deferred income annuities enable investors to take more control of their personal economy by creating a future stream of guaranteed income now. If you want to maintain your lifestyle, it’s time to lock it in.

One option is to move the money you had in stocks into an annuity.  You give up future upside but you’re also eliminating future downside.  By purchasing a deferred income annuity several years before retirement, investors have the potential to generate higher guaranteed future lifetime income, while reducing some market risk from their overall portfolio during the years before they retire.

Tags: , ,

Wednesday, March 16th, 2016 Wealth Management Comments Off on Retirement Risk Reduction

Straightforward Retirement Program

What we’ve seen over the past month is a bear market rally and what the fed does over the next week could mark the end of that. The bull market that celebrating its seventh anniversary actually ended in the middle of last year.

Given the volatile start within the equity markets in 2016, today, the phrase “financial crisis” is used loosely to embrace a wide range of events: stock market crashes, bank panics, sovereign bond defaults, market closings, illiquidity, institutional collapse, and sharp currency declines.

We’re likely to see a period of heightened volatility and it’s a very frustrating environment.  Trying to anticipate what returns you’ll earn on your money after you retire and how your income will match up with unpredictable expenses by necessity requires some guesswork and simplification.

In the past, when rates on savings accounts were typically 4% to 5% and bond rates were in the upper-single-digit percentages.  The current environment is much more of a struggle, because many safe fixed-income alternatives pay far less than 2%.

Bond rates are low, and many see them having nowhere to go but up. That introduces the potential for capital losses in the bond market.  Those who invest in funds to get fixed-income exposure are particularly at risk, because unlike a regular bond, you can’t just hold a mutual fund or exchange-traded fund to maturity and get back your principal.

To compensate, many investors have been accepting higher than normal levels of risk in exchange for finding ways to generate income without having to sell off investments or dip into the principal of fixed-income balances.

There’s a slow-moving time bomb out there, and that’s the gradual retirement of workers in an era where 401(k)-style defined-contribution plans have become dominant, replacing defined-benefit pensions. A new study of the state of U.S. retirement shows that this change leaves Americans woefully unprepared for their non-working years, with resources too meager to uphold their standard of living.

Pensions used to be held by people of modest incomes as much as the wealthy.  The 401(k) revolution changed this.  The timing couldn’t have been worse for switching to a 401(k) system.  The pension has been substituted with a stock plan that was never intended to serve as an adequate replacement.

The new 401(k)’s “were initially viewed as a supplement to traditional pensions.  The 401(k) experiment was a historical accident, never meant to provide complete security for workers. It may sound good to “control your own retirement,” but in practice it just loads risk onto people without the resources to handle it.

Annuities main strength is that it creates a “Personal Pension” income stream by insuring the risk of dying too late. With an income annuity you enjoy peace of mind knowing your income is guaranteed for an entire lifetime. The peace of mind may grow increasingly valuable over time as each of us grows older, we may become less confident managing a “Do It Yourself” approach to creating a reliable retirement income.

The purpose of an annuity is always income, whether you need money now, or in the future.  It can be helpful to think of an annuity as being similar to other types of investment vehicles.  For instance, a CD is an investment vehicle between you and a bank, and a municipal bond is an investment vehicle between you and a municipality.  An annuity is an investment vehicle between you and an insurance company.

Annuities are straightforward, with no potential for agent salesmanship or client misunderstanding – – YOU KNOW WHAT YOU ARE GETTING. Nothing is left up to chance or agent interference. The insurance company in the policy (contract) spells out that exactly how your annuity works. 

Each year, the growth and interest on annuities is credited, locked-in, and protected by the legal (statutory) reserve system of America’s insurance companies. Therefore, principal and interest can grow, compounding. Tax deferral is a big help to investors who currently pay tax on the interest they earn each year.

Guaranty Associations were created by state legislatures to protect life, annuity and health insurance policyholders and beneficiaries of an insolvent insurance company. All insurance companies licensed to write life or health insurance or annuities in a state are required, as a condition of doing business in the state, to be members of the guaranty association. If a member company becomes insolvent, money to continue coverage or pay claims is obtained through assessments of other insurance companies writing the same kinds of insurance as the insolvent company.

Tags: , ,

Wednesday, March 9th, 2016 Wealth Management Comments Off on Straightforward Retirement Program

Retirement Income Management

If you are edging towards retirement, you’re quite within your rights to fret over what looks dangerously like the start of another equity bear market.  Bear markets are better characterized as a death by a thousand cuts than a fatal stabbing. This year will see the end of a bear market that began all the way back in 2000.

More Americans are worried about their quality of life in retirement.  After the precipitous market declines in the start of 2016, most portfolios have lost much of their values and are worth less today than they were a few years ago, which has a substantial impact of retirement planning.

How you fund your retirement may be the most important financial decision you ever make. Even for those people who systematically save up in anticipation of their retirement can be overwhelmed with the particulars of making the transition as they get closer to their target retirement date.  If we have a recession, earnings estimates will go down and stocks will go down further.

The 401K plan is a retirement savings plan that is funded by employee contributions and in many cases will often be matched by contributions from the employer as well.  If you’re wondering why 401(k)s are shrinking, the Fed is part of the reason.  The Fed is holding back economic growth in the U.S.  Millions of Americans who rely upon interest earnings on their bank and money-market accounts have been forced to pinch pennies for too long.  Rates need to be higher, to make a healthy economy even stronger.

In today’s economy people are wondering if they have enough money to retire. This may just be the last straw for those of you that are thinking about retirement.  Being proactive and self-reliant is the key to being able to retire and staying retired.

Many people who have saved consistently for retirement have trouble making the transition from saver to spender when the time comes. Careful saving – for decades, after all – can be a hard habit to break.  One reason people have trouble with the transition is fear: in particular, the fear that they will outlive their savings or have medical expenses that leave them destitute.

A general rule of thumb says it’s safe to stop saving and start spending once you are debt-free and your retirement income from Social Security, pension, retirement accounts, etc. can cover your expenses and inflation.  Making investment choices can be the key to a happy retirement.

Experience and longevity are two things that you are looking for when choosing a company to set up your retirement plan.  One of the most credible options of retirement income planning is to give consideration to various annuity plans that are getting proved for being very useful for this particular financial purpose

  One of the striking benefit of annuities are that facilitate inflow of funds for entire lifespan. The amount put in during the accumulating stage will be rendered back regularly along with the interest that has been accrued over all through the years. It is for certain that annuities will pay funds to the policy holder as long he is alive, even if it is for 120 years.

  Annuities are most preferable option for retirement income planning since it also comes along with death benefits. In case of the untimely death of the annuity holder, the accrued assets, and its consequent benefits, will get transferred to the nominated beneficiary. Hence annuities provide not just income to the annuitant during his life time but also provide death benefits to policy’s beneficiaries.

 When it comes to payouts, annuities offer more than one choice. Its various payment choices are – payment for rest of annuitant’s life; lump sum payment of funds; periodic delivery of funds (monthly, quarterly or yearly); and systematic allocation of funds.

Economic scenario never remain stable all the time. The retirement income planning option that you choose must be able to adjust itself with the overall rate of escalation. The plan must be accommodative and at the same time must be able to flexibly raise the level of income on the basis of the rising and mounting prices. If you are looking for flexibility of this kind, the annuities are certainly the best option that you can think of after retirement.

Tuesday, February 23rd, 2016 Wealth Management Comments Off on Retirement Income Management

Timing Management in Retirement

The Dow Jones Industrial Average is now officially in a downtrend.  The Dow slumped 254.56 points, or 1.6%, to 15,660.18 on Thursday. The S&P 500 has fallen nearly 12% since last July. Rising volatility this year in stocks, bonds, and commodities has left investors scrambling to figure out what’s going on.

After seeing several hundred thousands of dollars evaporate in a matter of days, both in 2008 and most recently at the beginning of this year. Average everyday Americans who are retired or near retirement — all are genuinely and understandably concerned about their financial well-being and how best to navigate the challenges of the current marketplace.

At the same time, Life expectancies are getting longer. With that comes an increased risk of outliving one’s retirement savings.  If the stock market collapses, so will all retirement plans, so anyone depending on investment income will be unable to pay their bills.  However, Investors are routinely reminded by Wall Street professionals to keep their money in the financial markets all the times.

A “buy and hold” strategy, after all, supposedly guarantees you won’t miss any market upticks, which happen more frequently than market downticks on a historical basis.  Basically however, it takes more than one snapback rally, even a pretty big one, to repair the damage suffered over the past nine months.

Retired and Near Retired are generally less concerned about growth and more concerned about capital preservation.  They’ve already accumulated a sizable retirement nest egg and might prefer the safety and security of high-quality fixed indexed annuities to preserve and protect the level of wealth they’ve attained.  Annuities can help to prevent losing their retirement dollars by providing lifetime income for retirees.

With concerns over inflation and making sure that investments will meet our future needs, many people have turned to the fixed market for higher returns. A fixed-indexed annuity, or FIA for short, is an annuity that earns interest that is linked to a stock or other equity index. One of the most commonly used indices is the Standard & Poor’s 500 Composite Stock Price Index (the S&P 500).

Possibility to capture market dips. If you have gains from your index option, that gain is locked in permanently, never to go below that amount.  As an example, if the S&P 500 index goes from 1,800 to 1300 in one year, your index option for that year would not credit any gains, but you would start the next index option year at 1300 on the S&P 500.

A fixed indexed annuity is an insurance product that enables you to participate in the upside of the stock market without exposing your nest egg to its downside.  Investors in FIAs face little volatility, even in the bear market for stocks, because of guaranteed minimum return. Because they don’t have to worry about losing principal, little panic-selling is expected.

Possibly the most attractive provision of a fixed-indexed annuity is the no-loss provision. The great thing about fixed indexed annuities are that they actually do have a guarantee that you can’t lose the money you put in. Any deposit you make or gains that are credited get locked in at various time increments – that’s a good thing people! What this means is that values can only go up, not down.

This means that once a premium payment has been made or interest has been credited to the account, the account value will never decrease below that amount. This provides safety against the volatility of the S&P.  It makes sense when you consider how well the S&P 500 index has performed historically.

FIAs offer consumers what could be described as the best of both worlds: a market-driven investment with potentially attractive returns, plus a guaranteed minimum return. In short: You get less upside but much less downside. Maybe it’s time to check out these products.

Tags: , , , ,

Friday, February 12th, 2016 Wealth Management Comments Off on Timing Management in Retirement

 Powered by Max Banner Ads 

Receive "Five Wishes"

Fill out the form below to receive your free subscription to Annuity News and our gift to you "Five Wishes"

Five Wishes is a legally-valid tool you can use to ensure your wishes and those of your loved ones will be respected even if you can't speak for yourself. Five Wishes helps you express how you want to be treated if you are seriously ill and unable to speak for yourself. It deals with all of a person's needs: medical, personal, emotional and spiritual. Let your family and doctors know your Five Wishes!

Our strict privacy policy keeps your email address 100% safe & secure.

Five Wishes is changing the way America talks about and plans for care at the end of life. More than 12 million copies of Five Wishes are in circulation across the nation, distributed by more than 15,000 organizations. Five Wishes meets the legal requirements in 40 states and is useful in all 50. Five Wishes has become America’s most popular living will because it is written in everyday language and helps start and structure important conversations about care in times of serious illness.