Retirement Income Protection

As individual’s reach their 50’s and 60’s retirement begins to move to the forefront of their mind. If you are approaching retirement, you may start to feel this way. Over your life you have hopefully saved up enough that you can live off of the money you have or better yet the interest. However, there are no guarantees in life and if you do not plan accordingly, then you may end up running out of that money. There are so many things that could happen and it can be hard to plan for decades at a time. So, one of the options available out there can actually provide that guarantee and the peace of mind that you will always have some money coming in.

Interestingly, net worth and working income are not necessarily the best indicators of happiness, but what is a strong indicator of happiness is passive income and guaranteed lifetime income. So, what is the solution we are talking about? Why have we waited so long to say it? Well, it’s because products in the same family that came out in the 70’s and 80’s gave other products a bad reputation. The solution we are discussing is a Fixed Indexed Annuity. The annuities of old were variable annuities and came with fees, no protection from loss, and no guarantees. The exact opposite is true of Fixed Indexed Annuities. Lets break it down.

Indexed: When most people think of an index they think of a combination of similar things grouped together into one unit. Well, that’s exactly what is being used to grow your money with a fixed indexed annuity. The money that you put in will track a stock index, which is essentially a large group of established companies grouped together and their growth performance is averaged out to make your money grow. These annuities usually have a variety of options for indices you can choose from. A similar investment is known as an exchange traded fund (ETF) which essentially just tracks certain indexes in the stock market and is widely regarded as the safest way to invest in the market. The bottom line is your money will grow just as the stock market has since its inception.

Guaranteed: The thing that is unique about a fixed indexed annuity is that it can grow with the market, and when the market goes down your money does not. You are guaranteed to never lose principle. In your contract there will be a 0% floor, meaning you cannot lose money in any given year unless of course you withdraw some. The company is able to do this by utilizing a crediting strategy, meaning your account will only be credited at certain predetermined times, typically once a year. If the stock market goes up, the company will credit your account. If the stock market goes down, you lose nothing.

Accumulation and Annuitization: These are just two big words to specify the different phases of an annuity. In the first phase of your fixed indexed annuity there will be a surrender period. During this time, the plan is to let your money continue to grow untouched. Technically you should be able to access 5-10% per year and more for extreme circumstances, but that is not plan A for this money. After that first phase, whether it be 1, 5, 10, or 15 years, you enter the annuitization phase. At this time you can do anything you want with the money. You can let it continue to grow, you can turn on guaranteed income, or you can take it all out. The choice is yours.

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