What’s Your Biggest Financial Priority for Retirement?

Have you identified your most important retirement goal?

In a survey by LIMRA, a financial services research firm, 59% of people rated “having enough money to last a lifetime” as either their top or second-most goal for retirement.

The second most important goal was “remain financially independent,” which 47% of people rated as either a first or second priority. The 2,000 survey-takers were individuals between the ages of 50 and 75 who had investment assets of $100,000 or more.

Do those goals sound familiar? If so, it can be helpful to consider the possible benefits of an annuity.

What you need to know

For those who prioritize income predictability for life, fixed annuities can be a useful tool in your financial planning arsenal.

Fixed annuities are designed to provide a stable income stream for a pre-determined amount of time. That can include one lifetime, two lifetimes, or a specific number of years. You can buy an annuity and start receiving income right away, or you can buy a “deferred” annuity that will start paying sometime in the future.

Besides their predictability, one of the things people often like about fixed annuities is that they bypass investment markets. You don’t need to wonder about how much you can draw down during a bad year in the markets, because your income stream won’t have anything to do with the market. 1.1

Important product considerations

Of course, with a fixed annuity you also wouldn’t participate in market growth – this is one of the trade-offs that you’d need to take into account when considering an annuity.

It’s also important to consider the creditworthiness of your insurance company. Considering how critical this decision is, having a reasonable handle on the long-term viability of your annuity provider is important.

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Finally, learn about product fees in order to get a greater understanding of the true costs and benefits of a given annuity. While certain product features, like inflation protection, can serve a useful risk management function, they do typically come at a price. Your particular cost-benefit trade-off is unique to you, but it is very important to think it through.

Finally, remember that fixed annuities are not suitable for every person or situation. It’s very important to do your homework and take stock of your personal financial situation before making any insurance or investment decision.

Important personal considerations

 There are important personal considerations to think about as well.

As one of our clients recently said, “Why would I want to part ways with my life savings in exchange for some money every month?

This isn’t an uncommon concern. Depending on your priorities, a fixed income stream for life (or another chosen term) might seem like a robust solution to your retirement concerns, a really bad deal, or any number of other options in between.

In order to figure out if an annuity is suitable for you, we suggest really considering what it is that you care about most.

Fixed annuities aren’t investment products and they won’t help you leave more money to your family – so if you care about generating returns or maximizing your estate, you may want to look elsewhere. However, if your top retirement priorities involve stable income, protection against market downturns, and a way to avoid outliving your assets, an annuity can be worth considering.

Making this determination is, we believe, best done with a qualified advisor. Your advisor won’t just help you identify and prioritize your goals, he or she can also help you explore the different possible avenues towards reaching them. That might involve an annuity, or it might not!

Other options

Of course, fixed annuities aren’t the only ones out there.

Variable annuities, an investment product, provide more exposure to market growth while maintaining some of the same income features as a fixed annuity.

Annuities can also come with “riders,” or additional features that meet specific needs. We’ve talked about inflation protection, but other riders can include income for two lifetimes, guaranteed rates of income growth, or even the ability to access the value of premiums paid.

Again, no annuity strategy should be created without doing your diligence and considering whether the strategy is suitable for your financial situation. When considering any fixed annuity, variable annuity, or riders, please speak to your financial advisor to help ensure you’re on the right path.

What about all those other retirement decisions?

 One of the biggest sources of stress and confusion for many retirees is Medicare. The options and the fine print can be overwhelming – not to mention the need to successfully project your potential medical needs into the future!

To help you get started, we’ve put together a great introductory guide to Medicare: Medicare Basics. This free download will lay the groundwork on thinking through your choices and possible considerations, so that you can embark on the decision-making process with more confidence.

Download Medicare Basics for free today!

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Medicare Basics Guide

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Let Us Help!

We can discuss this topic and more at a complimentary appointment. As a bay area retirement planning coaches, we can give you a review and make suggestions based on your retirement objectives.

Important Disclosures

& Associates Insurance Services or United Planners Financial Services (United Planners). The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by United Planners.

To determine which investments may be appropriate for you, consult with your financial professional. Please remember that investment decisions should be based on an individual’s goals, time horizon, and tolerance for risk. Neither diversification nor asset allocation can ensure a profit or prevention of loss in times of declining values. United Planners does not render tax advice.

Securities and advisory services offered through United Planners Financial Services, member FINRA, SIPC. Pasquale Vitucci, CA Insurance Lic. # 0758212, is an Endorsed Agent of Vitucci & Associates Insurance Services CA Insurance Lic. # 0I06319. Vitucci & Associates Insurance Services and United Planners are separate and unrelated companies.
This page contains links to third-party company websites. By selecting a link, you will be leaving our website and launching a new browser window. These links are provided for informational purposes only and should not be viewed as an endorsement, sponsorship, solicitation or other affiliation with respect to any third parties. We are not making any recommendations or providing any advice on securities in particular or investments in general. Neither Vitucci & Associates nor United Planners Financial Services have reviewed the content of, and are not responsible for, the information or the results of the third-party websites.

1.1 Guarantees are subject to the claims-paying ability of the insurance company. Withdrawals of earnings are subject to ordinary income tax and prior to age 59½ may be subject to a 10% federal tax penalty. Unlike CDs, annuities are not FDIC insured.

Further Reading

Retirement income goals: LIMRA Secure Retirement Institute Retirement Income Reference Book 2015