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10 Questions to Ask Before You Buy an Annuity

Posted by on Mar 6, 2017 in Articles | Comments Off on 10 Questions to Ask Before You Buy an Annuity

You’ve probably already asked yourself Question Number One,


1. Should I buy an annuity?

And if you’ve done even a simple Google search to start answering this question, you’ve already discovered that there is a lot of information out there – but not all of it is helpful or accurate. And you’ve probably got even more questions now, right?

Don’t worry – we’re here to shine a light on the right questions to ask a financial advisor to help you decide if an annuity is a right choice for your retirement plan.

questions to ask before buying annuities


But first, some basics.

2. What is an annuity?

An annuity is an investment product that you buy from an insurance company. You’ll purchase the annuity with a lump sum payment, in exchange for their guarantee to pay you a monthly, or yearly, payment. Learn more about what annuities are

3. What type of annuities are available?

Annuities have become more complex over the years, but you’ll most likely be looking at one of two common options – a fixed annuity or a variable annuity. A fixed annuity offers a guaranteed payment, dependent on the projected returns of the provider’s investments, and the holder’s life expectancy. This is a great option if you’re looking to buy an annuity as a long-term, stable investment. On the other hand, a variable annuity gives the provider the ability to invest in stock and fixed-income accounts, so the annuity value will change with fluctuations in the market. The payouts for a variable annuity can change on a yearly basis, but there is the potential for a higher return over the long-term. See all types of annuities

4. How can I make sure I’ll receive my promised benefits?

Like any investment, buying an annuity does come with some risk. However, there are many ways to diminish this risk so you can feel confident in your purchase. One important step is to review the credit ratings of the insurance company, or companies, that you’re interested in purchasing an annuity from. Each of the financial rating companies, like Standard & Poor’s or Moody, have their own rating scale, but in general, look to purchase from insurance companies that hold ratings of A++ or AAA. This rating system extends to the salesperson you’re working with – make sure they can provide you with an AM Best rating.

5. How much does an annuity cost?

The cost of your annuity will depend on plenty of factors – like whether it’s immediate or deferred, or if you’re purchasing spousal protection. Administrative fees and other internal costs will also be included, so you’ll want to review each of these fees closely with your advisor.

6. Will the movement of the stock market affect how much my annuity is worth?

Yes, if you have a variable annuity its value will be impacted by changes in the stock market. When determining if a variable annuity is right for you, be sure to factor in any related fees that you are paying – like administrative or asset management fees. Those fees will be deducted annually from the total value of your annuity, so if you do incur some losses during a flat market year, it’ll be that much more of a pinch when those fees are included.

7. Will inflation impact my annuity?

It can, but there are annuities available that protect for inflation. It will lower your annual payments at first, but in the long run (15+ years), an ‘inflation adjusted’ option is a good investment.

8. What’s better – an annuity or a mutual fund?

It’s not so much about better as it is about what’s going to work for your specific circumstances. An annuity can cost more than a mutual fund, but it also offers guarantees that aren’t offered with a mutual fund – like a minimum death benefit or creditor protection.

9. Do I need to work with a financial advisor to buy an annuity?

It’s not required, but it is recommended. As their popularity has grown, annuities have become more complex financial products. To make sure you’re getting the best value for your investment, and that the annuity returns will meet your financial needs during retirement, it’s best to discuss the details with an experienced, licensed advisor.

10. When do you want to start receiving income from your annuity?

With an immediate annuity, you’ll start receiving payments, typically on a monthly basis, that will last for the remainder of your life. You’ll pay a premium rate for this, which will vary depending on your age when you make the purchase and life expectancy.

A deferred annuity is different in that you won’t see a return right away. These types of annuities are paid out on an annual basis and are a good option if you’re looking for a long-term investment. Before making any decisions, speak with an experienced financial advisor.


These questions will help guide you in choosing if an annuity is right for you, and if so, which one will suit your financial needs for years to come.


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Best Annuities for Retirement

Posted by on Feb 24, 2017 in Articles | Comments Off on Best Annuities for Retirement

Retirement is an exciting and overwhelming time.

You are thrilled with your new freedom and are ready to experience life – sign up for classes, spend time with family, kick your legs up and have a drink, or just relax. But with this freedom also comes an uncertainty about your financial future and how you are going to fund your day-to-day life and amazing adventures. There are several types of investments that could provide you with the income you need; one option to build your financial future is through annuities.

best annuities for retirement income


Annuities are sold by insurance companies to people who wish to make sure that they are going to have enough money to last them for the rest of their lives. To determine if annuities are right for you, answer yes or no to the following questions:


– Do you want guaranteed income for life?

– Do you want guaranteed income for a spouse?

– Do you want safe investments? 

– Do you want to protect your retirement from taxes?

If you answered yes to at least one of these four questions, investing in annuities may be a good option to consider.


Popular Annuities for Retirement 

Annuities for retirement can make a lot of sense if you worry about making safe choices and want retirement income. There are three types of annuities that tend to be the most popular for retirement income.

Fixed Annuities:

In their most basic form, they resemble a classic pension. Fixed annuities pay set rates, meaning the interest rate will never change on the investment; you will receive a set amount of money.  This makes a fixed annuity a popular option for retirees who want to have a known income stream.

Equity-Indexed Annuities:

A special class of annuities that provide you with income depending on how well an index does, like the S&P 500.  EIAs promise to pay you the minimum agreed upon interest rate, even if it is higher than the index’s rate. On the plus side, if the index has a higher rate, you will receive income reflective of the rate change.

Variable Annuities:

A variable annuity offers a range of investment options. Variable annuities are mutual fund investments. Mutual funds are bonds, money market instruments, or a combination of the two(?).  The annuity payments will reflect any interest rate fluctuations of the mutual fund.

 invest in an annuity for retirement

Investment Management Companies 

Choosing the correct annuities that fit your retirement needs is a daunting task. There are many investment companies that can help you determine which annuities would work best for your retirement. Provided below are three investment management company annuity reviews.

Fidelity Annuity Reviews: Fidelity provides an annuity comparison table. Fidelity has a receptive customer service that provides guidance throughout the investment process.

Vanguard Annuity Reviews: Vanguard lists four questions to ask yourself when considering an annuity. Vanguard is known for catering towards retirement investors, those with high account balances.

Charles Schwab Annuity Reviews: Charles Schwab provides a video and infographic on annuities. They also have a chart on the costs and initial contributions needed for each annuity.


Reach out to an Advisor 

A trusted advisor can help guide you towards the best financial plan for your retirement. If you have questions about annuities and how you can use them, contact one of our trusted advisors today!

401k Rollover to Annuity

Posted by on Jan 18, 2017 in Articles | Comments Off on 401k Rollover to Annuity

The finance world can be rather confusing with all of its different terms if you are not a professional in the field. With different types of retirement plans, advantages and disadvantages for each and fees associated with every type, one can easily decide to brush off the importance of learning the basics. There are many benefits, for example, in understanding how a 401k rollover to annuity is beneficial for you. Now if I go back and read this last sentence, I feel as though I am already overloading you with words you may be unfamiliar with. We will cover the magic of a 401k rollover to annuity and the benefits of considering this option with your financial advisor.

401k rollover to annuity


401k vs Annuity

Let’s start with understanding what a 401k is. A 401k is a savings plan that is geared towards the workplace and its employees. It allows employees to invest a portion of their paycheck before taxes are taken out. This savings then grows tax-free until retirement age and its withdrawals are taxed as income. Now, what is the difference between an annuity vs a 401k? An annuity is a contract between you and a 3rd party where you make an exchange by making a lump sum payment and are provided with an income for a certain period of time (or for life), a death benefit, long term care benefits and growth on your assets.

Both a 401k and an annuity has its separate advantages (read more about the pros and cons of annuities) but how does one convert a 401k to an annuity and what are its benefits? Now you’re thinking in the right direction and getting the hang of this! Let’s see what happens when you consider this type of retirement plan and make a list of all of the benefits.

When you hear the words 401k rollover, this simply means that your 401k funds are being transferred into another qualified retirement account. In this instance, we will consider the benefits of a 401k rollover to annuity. We will discuss the eight main benefits:

1) Control

– Annuities allow you to have control over your savings. Rather than your employer or plan sponsor having direct control over your savings fund, the control is transferred to you.

2) Costs

– The costs between an annuity vs a 401k is significant enough that it is important to take note. 401k costs usually range between 1%-2% but can go up as high as 2.5% or more! Depending on the type of annuity and options one adds, they can be significantly less than the employer-sponsored plan costs.

3) Consolidation

– The majority of people will change employers throughout their life. With a 401k converted to an annuity, you are able to consolidate the multiple plans that you have with multiple employers. This making managing your money easier on your end as you can see all of your money in one place.

4) Protection

– Rolling your 401k to an annuity also adds an extra level of protection. You are protected from market risk and longevity risk. Market risk is simply the risk that is part of the value of your investment in which it can decrease due to moves in the stock market. Longevity risk is important to consider because of how much life expectancy has increased. Annuities allow for a lifetime payout rather than worrying about running out of money in your 401k if you end up living longer than expected.

5) Risk Certainty

– Annuities allow you to have risk certainty that cannot be matched anywhere else. In other words, market losses will not hurt your annuity savings.

6) Planned giving

– Charitable gift annuities allow you to contribute to your charity of choice on a scheduled basis. These annuities also have the advantage of being low cost, pay you income over your lifetime and extra tax benefits while you are alive. Once you pass away, any money that remains will go to your designated charity of choice or your heirs.

7) Avoiding Probate

– When one passes away, you do not want your loved ones to have to go through probate to access the money. By rolling your 401k to an annuity, you pass this hoop as an annuity is transferred directly to your listed beneficiary.

8) Peace of Mind

– The above benefits all come down to the most important factor. They all provide you and your family peace of mind.


It is important to consider all of your options and sit down with a financial professional to weigh out the pros and cons of each option and use what benefits you. A 401k rollover to an annuity is a great start to a further look into the benefits of putting your money to work for you for retirement.

What Does the New DOL Fiduciary Rule Mean for You?

Posted by on Dec 16, 2016 in Articles | Comments Off on What Does the New DOL Fiduciary Rule Mean for You?

After many years of deliberations and public hearings, the Department of Labor (DOL) is implementing a new fiduciary rule with regards financial advisors who represent plans covered by the Employee Retirement Income Security Act of 1974 (ERISA). The new DOL fiduciary rule requires all financial professionals associating with retirement plans or providing retirement planning guidance to be ethically and legally bound to fiduciary standards.

new fiduciary rules from department of labor

What is a fiduciary?

The simple definition of fiduciary says that a fiduciary is a person to whom someone has given their utmost trust and confidence to protect and manage financial assets. The DOL fiduciary rule is going beyond the simple definition and going with a legal interpretation that defines fiduciary duty as acting in the best interest of the beneficiary without any self-dealing or conflict of interest. The fiduciary is assumed to have greater knowledge and expertise than the beneficiary and must always put the needs of the beneficiary first.

—> An example is a stockbroker who sets aside all consideration of commissions when considering what investment is best for the client.

Previously, the investment advice fiduciary standards of ERISA were enforceable under the standard of suitability. An investment recommendation that met the stated objective and needs of the client was appropriate. Commissions and fees paid to the financial advisor did not matter unless they were overly excessive.

The problem with the suitability standard is that investors often paid unnecessary fees. These fees serve as a drag on investor returns. With more than $24 trillion in retirement assets including more than $7.5 trillion in Individual Retirement Accounts (IRAs), the extra fees are conservatively estimated to be more than $20 billion per year.


Does the new fiduciary rule apply to my investments?

The DOL fiduciary rule applies to defined contribution plans including all 401(k) plans, Simplified Employee Pension (SEP) plans, savings incentive match plans (Simple IRA), employee stock ownership plans, and 403(b) plans. The new fiduciary standard also applies to all traditional defined benefit plans and IRAs. After-tax investments in standard brokerage are not part of the new Department of Labor rules.

Registered Investment Advisors (RIA) and fee-only financial advisors will experience little change from the new fiduciary rule. However, securities brokers and insurance agents who receive the bulk of their compensation from commissions will be in a tough place in their new role as fiduciary advisors. Commission based products will still exist, but financial advisors will be required to obtain a signed Best Interest Contract Exemption (BICE) from their clients. The BICE is a statement on the client’s part that they understand all the details regarding the financial representative’s compensation. The financial advisor needs to fully disclose in plain language all forms of direct and indirect compensation.

The investments hit hardest by the new DOL fiduciary rule are front-end loaded mutual funds, funds that have 12b-1 marketing fees, and some forms of annuities. Many brokerage firms that offer these kinds of plans are already adjusting their fees, and commission schedules to plans reward the longevity of investments in a fund at the expense of a broker’s upfront compensation. A few of the larger brokerage houses are eliminating all commission based retirement plan options except for self-directed investment accounts where the client is responsible for all investment decisions. Other firms plan on continuing with commission-based systems but will require all clients to sign a BICE and provide the clients with ongoing disclosure information.


How Will the DOL Fiduciary Rule Affect Annuities?

Insurance companies underwriting annuity products will need to make adjustments as these products normally pay upfront commissions. Some annuity plans have already been under fire for aggressive fee schedules. However, better run insurance companies have been making changes to annuities by lowering fee schedules and making voluntary disclosures to compete better with mutual funds. Specific new policies are coming that are a smoother fit with the new rules. The new policies are simplified only to include the best features that annuities have to offer such as portfolio protection, guaranteed returns, and potentially guaranteed income. Over time, annuities could become a much better investment option with this increase in transparency.

The immediate winners from the implementation of the new DOL fiduciary rule are investors who need no hand holding from a financial advisor when making decisions. Potential losers are people who used to get free advice from brokers who earned commissions and now must pay advisory fees to learn about their options. Financial firms that rely on the commission and extra fee income to run a sales force will also take a short-term hit. The implementation of a streamlined and more ethical system will reward everybody with lower fees and better returns. Even the brokerage houses will eventually benefit from the increasing receipts of standard account fees earned on larger client account balances.


Annuity Payout Options

Posted by on Dec 14, 2016 in Articles | Comments Off on Annuity Payout Options

Annuities act as an insurance product that pays you income and some investors use them as part of their retirement strategy. There are three different types of annuities, including fixed annuities, variable annuities, and equity-indexed annuities. Each differs in investment strategies, fees, risk tolerance and returns. Along with different types of annuities, there are different annuity riders that are an addition to your annuity that may expand the policy’s benefits or exclude certain conditions from the annuity’s coverage. Therefore, it is important to speak to a financial professional to learn which annuity (and annuity payout option) suits your needs best.

annuity payout options

Let’s say that you are interested in purchasing an annuity but would like to do a bit of research of the different annuity payout options before speaking to a financial advisor or financial professional. Annuity payout distributions are the most commonly misunderstood part of annuities. A basic piece of knowledge is the age at which you may begin to withdraw from your annuity without any penalty charges. That age is 59.5. Prior to age 59.5, you will be paying Uncle Sam a 10% early withdrawal penalty alongside income tax on your investment earnings. Having an idea of the most common annuity payouts and payout schedules is important because it helps you have a better understanding of when and how you will be receiving your income. Here we will discuss the top annuity payout methods and options:

1) Lump Sum Payment

This option allows for you to have access to the full amount of money of your annuity payout. The pros of this is that you do not have to wait for a monthly and possibly fixed payout. You are then free to manage the money as you please. The flipside of this is that you now have a large amount of money at once and may spend it too quickly or it may be mismanaged or invested poorly and you run out of money. Another con is that you have to pay income taxes on the entire investment-gain portion of the annuity.


The two most common methods to receive your cash payouts are the systematic withdrawal schedule and the annuitization method. The following two options describe how the systematic withdrawal schedule pays out. With this method, you have total control over the timing of your distributions but have no protection against outliving your annuity assets.



2) Fixed amount

With this payout option, you choose the amount of payment that you want to receive each month and the payments continue until you stop them or you run out of money. The pro to this option is that you are free to select the amount of money you receive monthly. The con to this option is that you will not have a guaranteed income for life.

3) Death benefit

If you pass away prior to your income payments beginning, your beneficiary may receive a death benefit from the insurance company that sold the annuity. Death benefits commonly include the contract value or the premiums paid.



The second most common method is the annuitization method. This method guarantees you monthly income for a defined period of time.

4) Fixed Period

This annuity payout option allows you to choose a defined period to receive your payouts. For example, 10, 15 or 20 years. Payments will continue post-death and will then go to your chosen beneficiary.

5) Life Only

With this option, the insurance company makes payments for as long as you live. The payment amount is decided by life expectancy. In other words, the longer your life expectancy, the smaller the payment amount. The con to this option is that you are not able to choose your payment amount and there is no guarantee that you will receive the total amount you accumulate. The pro to this option is that you are guaranteed income for life and if you live longer than your life expectancy, you could receive more than the accumulated value of your annuity.

6) Life with Period Certain

This annuity payout option is also known as Guaranteed Term and is similar to Life Only. There is an addition to this annuity payout that you are guaranteed income for a certain period of time. For example, if you choose 10 years but pass away prior to the end of the term you are guaranteed payment of your estate or your beneficiaries will continue to receive payment until the end of those 10 years.

7) Joint and Survivor Life

This annuity payout takes into account your partner or a survivor. The insurance company will pay you or your survivor for as long as either of your lives. The amount of the monthly payments is typically smaller than the Life Only option because the company now has to pay the longer of two lifetimes.


Note that not all annuities provide these types of options and may offer different types of annuity payouts. Depending on whether you invest in a fixed annuity or a variable annuity, for example, can change how you receive your annuity payouts. Again, speaking further with a financial professional is recommended to pick an annuity with annuity rider options and retirement payout options that best suits your needs.


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Pros and Cons of Annuities

Posted by on Dec 6, 2016 in Articles | Comments Off on Pros and Cons of Annuities

Is Using Annuities for Retirement Income Good or Bad?

The most important financial goal one can have is to save for a comfortable retirement. Very few Americans have the luxury of retiring with a hefty pension and therefore planning ahead of time is imperative. The only guaranteed retirement income many rely on is Social Security and that may not be enough to pay for your retirement and living expenses. Taking a look at other options to help diversify your income is important and can help give you a better lifestyle.

We will be taking a look at annuities and answering the questions many of you have. Are annuities good or bad? Are annuities a good investment? What are the pros and cons of annuities?

annuity pros and cons

First, let’s identify what annuities are. Annuities are an investment or form of insurance that entitles the investor to a series of annual sums of money. There are numerous types of annuity funds such as fixed, variable, immediate and hybrid annuities which all differ in risks, payouts and benefits. Speaking to a certified financial advisor can help you understand the details on each type. For this article, we will focus on fixed annuities. Fixed annuities have a minimum rate of return that never changes regardless of what happens in the financial markets. You are always guaranteed a stable amount of cash for a set number of years or for life while the insurance company carries the majority of the risk.

You can also add additional benefits known as annuity riders. These act as extra protection for your financial investment at an extra cost. Examples of annuity riders include income riders, nursing home riders and death benefit riders. An income rider guarantees you income for a certain amount of time in which you are able to choose the start date that you will begin to receive your distributions. A nursing home rider helps cover expensive long-term care. A death benefit rider ensures that a family member or beneficiary will be able to collect the remaining principal payment that you invested should you die before receiving the full amount.


So what types of pros and cons do annuities carry?are annuities a good investment

Well, I am glad you asked! Let’s review a few to help you understand annuities a bit better. By weighing out the benefits and risks associated with annuities you can make a confident decision whether to invest in them or not.




Pro #1: Guaranteed Income for a Set Number of Years or even for Life!

Annuities allow you the option to opt for income for life. For example, if you purchased a $100,000 lifetime fixed annuity with a 8% income rider at age 55 and waited until age 65 to begin receiving distributions, you’d receive a guaranteed $1,000 per month for the remainder of your life. This is preferable to some people who don’t have the time or skill to manage a stock portfolio and do not want to deal with the ups and downs of the market. Peace of mind is a great addition to have during a quality retirement.

Pro #2: Principal Protection

One of the most notable features of fixed annuities is that the value of the annuity will be guaranteed to be at or above the initial amount that you invested. It is guaranteed that you or your beneficiaries will receive back at least what you invested in the annuity. An example of this was seen when discussing the death benefit rider.

Pro #3: Tax Benefits

Any financial growth that occurs with your annuity is tax deferred. What this means is that as your money compounds throughout time, you do not have to pay taxes until you begin to take withdrawals. When you opt for a fixed annuity with an income rider, your payments are part principal and part growth earnings. The principal was put in post-tax so that portion is non-taxable. The only portion that you will owe tax on is the earnings portion of your withdrawals.

Pro #4: Inflation Protection

Annuities give you the ability to customize your investment to your needs. You can customize an annuity to ensure that your annual stream of income keeps pace with inflation. This is critical because inflation can cause an upsetting effect on your assets. The only downside to adding this feature is that it will cost more and can cause your first payments to be lower.


Con #1: High Costs

Many annuities come attached with a high sales commission or a hefty annual fee. For this reason, it is important to shop around and really study the details of any investment contract prior to purchasing.

Con #2: Lack of Flexibility

Annuities tend to be one of the least flexible investments that are available to retirees. For example, once you purchase an annuity contract your money is tied up and unless you pay a very high fee to retire the money, you do not have access to the lump sum. In the instance of a large unplanned expense, an annuity may not be seen as the best investment choice. For this reason, studying, working with your financial advisor and learning about annuity riders can help with these unforeseen expenses.


So, are annuities a safe investment? Annuities are a great investment tool that can be customized to your needs and wants during retirement. Doing your homework and speaking with an annuity advisor to review all of the pros and cons can help you with your decision before diving in.



What is an Annuity Fund?

Posted by on Nov 29, 2016 in Articles | Comments Off on What is an Annuity Fund?

An annuity fund is where the investment portion of your annuity policy resides. There are a two main types of annuity policies and the annuity funds for each are different.

what is a annuity fund

Fixed Annuity Funds

Fixed annuities have annuity funds that pay a predetermined set rate of return like a certificate of deposit or bond. The insurance company evaluates the risk involved, analyzes the fixed securities market, and sets a rate of return.

Immediate annuities with a fixed rate of return pay an amount that does not change over the life of the annuity. Holding the rate of return constant is how the issuer can determine the amount of the guaranteed lifetime income to pay out for the one-time lump sum investment.

A fixed retirement annuity receives steady contributions between now and when you retire. When you initially start investing, the insurance company will set a fixed rate of return and sometimes a minimum rate of return.

The annuity might have a clause that allows the insurance company to increase the payment if investment returns increase allowing them to be competitive with market interest rates should market rates increase. Remember, they want you to keeping making your contributions.


Where are Fixed Annuity Funds Invested?

The annuity funds go into the company’s general portfolio and not into an account set up solely for you. Asset managers conservatively divide the money between various investments. The bulk is used to purchase predictable government securities and investment-grade bonds or preferred stocks. They invest the remainder in blue-chip stocks and commercial real estate.

Insurance companies are experts at receiving above long-term market returns on balanced portfolios. Assuring that your funds are available as needed and enabling them to offer you low-risk returns that are better than you could obtain on your own.


Variable Annuity Funds

Variable annuities do not have a set payment rate. You invest the annuity fund in stocks and bond portfolios that have the potential to give you a higher return on your investment. A retirement annuity fund from Fidelity Investments provides more than 50 different options ranging from growth stocks to government bonds.

Passive investors can choose balanced target date funds or equity index funds and sit back. Maybe you want to manage your investment funds actively. You can move money between domestic equity funds, international funds, bond funds, and individual sector funds as you think is appropriate to profit from shifting economic conditions.


A major attraction of variable annuities is the extra tax-free growth of principal compared to a fixed annuity. The downside is that your annuity fund can lose value when markets decline while a fixed annuity continues to grow.

Wouldn’t it be great to have the upside profits of a variable annuity and the stability of a fixed annuity? Well, you can.


Annuity Insurance

Annuity fund insurance is a form of portfolio value protection insurance. It is written into some annuity contracts and available as an insurance rider for many variable annuities. The protection is only available on select balanced portfolios that combine a mix of stocks and bonds. You give up the right to active trading.

One common form of annuity insurance reduces your increase in good years as you share a set percentage of all gains with the issuer. In return, your portfolio does not lose any value in bad years. This form is usually written directly into contracts.

Separate insurance riders like the secure income benefit that Vanguard Group uses with its variable annuities. You pay a premium based on a percentage of your annuity value. You are guaranteed a set percentage of your initial portfolio you may withdrawal each year for life. Once you start taking withdrawals, the amount of your withdrawal can never go down even if the current value of your account drops to zero. However, the payments can go up.

In good market years, the value of your annuity fund increases. The new value is the basis for the rest of the guaranteed payment to a higher amount. Once increased, your payment never goes down.


Death and Your Annuity Fund

Upon your death, what happens with your annuity fund depends on the current stage of your contract. If payments have started, they will continue to a joint beneficiary until that beneficiary’s death. When there are no living beneficiaries, the issuer receives the balance of the account.

When the annuity fund is pre-withdrawal, the value of the account can be paid out to any listed beneficiaries. If the beneficiary is a spouse or partner, the contract can be transferred solely into their name.

A third option exists. The return of premium rider ensures that the annuity fund owner will never receive a payout of less than the amount of money invested. If the owner dies before receiving the full amount, the remainder goes to a designated beneficiary like a life insurance policy benefit. Sometimes the rider is written to cover the full current value of the account.

Retirement For Single People

Posted by on Nov 16, 2016 in Articles | Comments Off on Retirement For Single People


How does Retirement Planning and Investing Change for Singles?

“Education is the passport to the future, for tomorrow belongs to those who prepare for it today.” – Malcolm X


As the years pass by, time becomes a valuable tool that many wish could be purchased. Educating oneself with financial basics is instrumental to planning ahead for the future. Retirement for single people is especially important due to the many added factors that must be considered. Retirement planning and investing for singles requires additional protective measures such as making sure to draw out a will or having a power of attorney. Unfortunately, todays world is heavily geared towards family life, and so most of the financial literature available will also be geared to retirement planning when you have children or other family members to factor in. We will be taking a further look into retirement and investing for singles, and pointing out important details to take into consideration as you plan for your future.


retirement investing for single people


Time – Let your money grow

One of the most crucial factors in retirement planning is time. This is one of the few similarities for single and married individuals. It is important to have a vision early on and to sit down with a financial professional to have a better monetary idea of where you are today and how you imagine your retirement lifestyle. The following is a simple scenario that shows you how valuable time can be for you and your financial goals:


Person A 

–> Begins maxing out their Roth IRA (current maximum yearly contribution is $5,500 and current average market return for the S&P 500 is 7.0%) at age 25 and plans to retire at age 65.

At age 65, $220,000 ($5,500 x 40 years) that was self-invested over forty years has become $1,097,993.

Person B

–> Begins maxing out their Roth IRA just eight years after Person A, at age 33 and plans to retire at the same age.

At the age of 65, the $176,000 ($5,500 x 32 years) that was self-invested over thirty-two years has become $606,200.


The only difference in money self-invested was $44,000 over eight years but led to a difference of roughly $400,000 for retirement!

Investing for singles is especially important as you are relying solely on one income and your most valuable tool in this instance is time. Make it a goal to start early!


Budgeting & Saving

The cost of living for single people is 40%-50% higher than that of married people. For this reason, it is very important to create a budget and make a habit out of saving. The easiest way to visually see where your money is going is save your receipts for a full month. There are also phone apps available to track your spending but having physical receipts to include cash transactions is important. Once you become aware of where your finances are going, you can assess where you may be over-spending and create a budget for that category. Being aware of where your finances are going is a very important step which will lead to wise decisions for retirement and investing decisions later on. Make it a goal to save 10% of each paycheck and increase this rate if possible over the next few years.


Importance of a Safety Nest for Singles

The recommended amount for a safety nest in case of emergency purposes is 3-6 months’ worth of living expenses. In today’s economy, it is preferred to have 6-12 months’ worth of living expenses. It is also very important for singles to have disability insurance in case of a setback. Without a second person’s income to rely on, your retirement or investments could be drained rather quickly.

Will & Power of Attorney

When single people plan for retirement, it is very essential to draw out a will alongside any financial investing that one does. Leaving behind an inheritance without a will can be a mess for families to sort out, and even more chaotic when there are no obvious aires such as children or spouses. It is much easier to leave this settled beforehand to your choice of appropriate beneficiaries. Also, assuming that there are no children or immediate relatives to handle your assets and will, it is also especially important to appoint a power of attorney that you trust can handle these situations, in case of an emergency.

These are things that many people wait far to long to consider and setup. As soon as you’ve began investing any amount of finances, you should be looking to get a will written and a power of attorney chosen.


Are Annuities Safe Investments for Singles & Annuity Riders

When going over your retirement planning with a financial advisor, you may be advised to consider annuities with an annuity rider. A retirement annuity is a tax effective retirement investment that can vary on their payout based on if it is fixed, variable or indexed. Annuity riders are added benefits to a basic annuity and may sound enticing but can cost 0.1% to 1% of the annuity’s value per year. For single people, riders can allow you to customize an annuity to best suit your future.

Retirement annuities should never be considered as your sole income for retirement. There are advantages and disadvantages that one must consider before proceeding in purchasing an annuity and it is important to do your research as well as consult with an experienced annuity advisor. Annuities are best to be thought of as a supplemental income alongside a Roth IRA and 401K.


Retirement Planning and Investing for Singles doesn’t have to be complicated

There’s lots of information in the world today that can help guide you through planning for retirement, but just be sure that if you are a single adult that you speak to a financial expert that will help dot your ‘I’s and cross your ‘T’s. That way nothing will get missed and you can relax knowing all your assets will be handled as you wish.

Establishing a Guaranteed Retirement Income

Posted by on Nov 7, 2016 in Articles | Comments Off on Establishing a Guaranteed Retirement Income

Retirement income can be a very stressful topic. How do you know if you will have enough money for retirement and how do you ensure that you do not run out of money? A review of your retirement assets should include a look at the options that exist for setting up a guaranteed retirement income for life. You have a few choices.

planning guaranteed retirement income


Traditionally, defined benefit pensions were the most common form of retirement funds. You and your employer each made contributions to the fund each year of employment. When you retired, you received a guaranteed income for life. Public employees still enjoy traditional pension plans, but very few private sector companies offer them anymore. Private employers have switched to defined contribution programs such as 401k plans.


Social Security

Almost all retirees receive Social Security benefits. You and your employers have paid into Social Security for your entire career. Recipients get a monthly guaranteed retirement income until they pass away. There are annual cost of living increases to keep pace with inflation. It is a wonderful concept with one serious flaw. The average monthly payment is only $1,350. Hardly enough money to live on even in areas with the lowest cost of living.


Create Your Own Guaranteed Retirement Income

Creating your guaranteed lifetime income is easy if you have assets in an IRA or 401(k). You simply set up a plan that pays you a steady amount. The trick is deciding on the proper amount. If the payment is too small an amount, you never enjoy the benefits of the principal. If the payment is too high, you can eat up the principal and run out of money before you run out of life.

A 2% annual withdraw of principal is easy to maintain at current yields on long-term Treasury securities and the dividend yield of the S&P 500 index. Anything over 3% relies on a rising stock market to maintain payments. Volatility in the markets could reduce your principal and require a reduction in the size of your distribution.


Retirement Income from Annuities

best annuities for retirement

Single Premium Immediate Annuity

A Single Premium Immediate Annuity (SPIA) is a type insurance investment contract guaranteed income annuity. You pay a one-time lump sum to an insurance company. The insurance company looks at actuarial tables, interest rates, its expenses, and the fees it needs to charge to determine an amount of money it will pay you every month for the rest of your life.

Once you give the money to the insurance company it no longer belongs to you. If you were to die in six months, the insurance company keeps the balance of the principal. If you live 20 years longer than the actuaries predict, you receive a phenomenal return on your investment. Either way, you have the peace of mind that comes from having a stable guaranteed retirement income.

An Immediate Annuity is great for an individual who has no heirs and wants to receive the highest possible cash flow from their guaranteed annuity income fund. However, what if you have someone such as a spouse whom you would like to see taken care of for the rest of their life? There are variations on the SPIA designed just for such a situation.


Guaranteed Income Annuity Two-Life Plan

The two-life plan works the same as a standard SPIA except the payout is based on the life expectancy of both beneficiaries. If one person passes away, the remaining beneficiary receives the full benefit payment for the rest of their life.

You might be thinking that it is great to have a guaranteed income but what happens if inflation returns to a high level? Does your payment increase? The answer is no, but the issuers of annuities have investment choices available to alleviate this problem.


Variable Annuities

Standard annuities invest your principal at a predetermined interest rate. Variable annuities allow you to invest your principal in different portfolios consisting of stocks, bonds, and even real estate investments. These portfolios operate similar to mutual funds and sometimes are a special class of shares within mutual funds managed by the annuity issuer. You can receive monthly payments based on a set percentage of your portfolio and in the dollar value of your payments will increase as your portfolio grows.

The downside is that if the market goes down, your payment goes down. A decreasing payment is contrary to the concept of developing a guaranteed retirement income. However, knowing that this is a problem for some investors, insurance companies have developed variable annuities WITH guaranteed income options.


Guaranteed Income Variable Annuities

You can add a guaranteed income rider to your variable annuity. A rider is an additional contractual agreement that modifies the standard plan. Typically, a guaranteed income rider sets a lifetime payment that you receive no matter what happens in investment markets. The base value of your principal is set and never decreases. If the investment portfolios go up in value, your principal increases and you can elect to receive bigger payments. Many plans allow the transfer of all or part of your funds from a variable annuity into a standard annuity once per year.

There is a cost for the privilege of having your cake and eating it too. Some companies will charge you a small premium or fee based on the value of your portfolio. Others charge no additional fee but when the market goes up they receive a percentage of the increase in portfolio value as payment for the guaranteed income and principal stability option.


When to Set Up a Variable Annuity

You do not have to wait until retirement to set up a variable annuity. A variable annuity can be set up at any time with a lump sum payment, a stream of monthly payments, or a combination of both. Your profits accumulate and compound with taxes deferred until you begin receiving payments from your account. You can then wait until you retire to set up the guaranteed income option.

The money for your variable annuity contribution can come from many sources including the sale of a home, an employment buyout payment, or even from your 401(k) or IRA accounts. Many people choose to set up a variable annuity within a retirement savings plan. Any taxes on income payments and the profits on their reinvestment is delayed until you decide you to withdraw money. Roth 401(k) or Roth IRA accounts are very attractive vehicles for holding variable annuities as withdrawals from Roth accounts are not taxed if the account has been open for at least five years and you are more than 59 ½ years old. You not only have a guaranteed income fund but a tax-free guaranteed retirement income for life.



Buying Secondary Market Annuities

Posted by on Sep 22, 2016 in Articles | Comments Off on Buying Secondary Market Annuities

Considering Buying a Secondary Market Annuity?

Secondary Market Annuities: An individual receives a structured settlement from a personal injury lawsuit (this is the most common scenario). The settlement amount may be quite large, but the payments are distributed through an annuity over time. Payments are made, usually monthly and often for a very long period (20 years is not uncommon). However as the winner of the settlement, you would prefer cash up front – so you decide to sell your payment stream at a deep discount for a lump sum payout to one of the many Firms (called “Factoring” Firms) that make these kinds of purchases.

buying secondary market annuities

Factors to Consider:

Because the factoring firm has bought the income stream at a discount, they can make a profit and maintain high value for potential customers. With the markets currently running to low interest rates, this may seem like a boon to many potential investors because they can get interest rates that are much better then generally available – often twice as good.

So, should you consider purchasing Secondary Market Annuities? Jason Zweig of the Wall Street Journal suggests caution:

“But as is so often the case when investments are promoted on the basis of high yield, these deals are unsuitable for most investors. Even in the rare situations when they might make sense, you must proceed with extraordinary caution.” (READ THE ENTIRE ARTICLE HERE)


Risks in Buying Secondary Market Annuities

Well, like any normal annuity there is little risk that the issuing insurance company will fail – but do your due diligence, make sure the company is well rated and is solid financially. Annuities (including SMA’s) also have some State level guarantees – each State is different so you’ll need to inquire with your Trusted Advisor, but most will insure up to $100,000.00.

The major investment concern when dealing with Secondary Market Annuities is FINANCIAL LIQUIDITY! Just like a normal annuity, SMA’s generally require a fairly substantial investment. Unlike an annuity, where you can work with your Advisor and determine an appropriate amount to invest, Secondary Market Annuities are sold at a fixed price. Sure it might be a screaming deal to get say, 1 million in payments for 10 years at half price, but can you afford to tie up $500,000.00? You need to be sure that you can, because unlike the person who originally sold their structured settlement, you cannot sell yours if you should have an emergency and “need cash now.”

Lastly, you need to be aware that all Secondary Market Annuities need to go through a court process before they can be approved for sale – you should make sure that your Advisor can confirm that the company you are considering a purchase from has done all the necessary legal work, and your Advisor may recommend that you hire an expert in Secondary Market Annuities and their complexities to make sure that everything is in order.

If you are looking to speak to a Trusted Advisor regarding Secondary Market Annuities you can COMPARE RATES with us and we will help you find a reputable source for SMA’s.