Why Buy an Annuity When the Market is Up?

Why Buy an Annuity When the Market is Up?

Unlike an investment, once you commit a fixed amount of money to the insurance company, that company is contractually obligated to provide you a minimum level of income with the option to continue receiving it as long as you live. All guarantees are backed by the financial strength of the issuing insurance company.

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Annuity Strategies

In a 2017 Nationwide Retirement Institute survey, financial advisors revealed some of the primary concerns of today’s pre-retirees, including maintaining their current lifestyle during retirement. These people also are less concerned with growing their assets; instead, they are focusing on drawing them down in a disciplined strategy without taking out too much too early -- and potentially running out of money. This often means transferring assets out of high-risk investments and putting them into more income-oriented vehicles.

With this in mind, annuities have become a popular go-to strategy for a portion of a retiree’s nest egg. With an annuity, you can determine how much money to use to purchase an annuity contract based on how much income you’ll want to receive from that source during retirement. Annuities can also provide a steady and reliable income stream, which is very helpful in retirement planning. It’s important to remember that annuities are designed for long-term needs and that they may be subject to fees, surrender charges and holding periods, which vary by company.

Because annuities are insurance products that require understanding, it’s a good idea to work with an experienced financial advisor to determine which type of contract best suits your particular needs. It can become your personal income stream, wherein you decide how much money to commit now for a guaranteed income in the future. Also, be aware that an annuity income stream is guaranteed by the financial strength of the issuing insurer, not the government. As always, we’re here to help you evaluate whether an annuity is appropriate for your situation.

The good news is that today’s annuities offer a wide spectrum of features and benefits to help customize your income stream. For example, some offer riders that provide payout options for a terminal illness, chronic care, disability and even unexpected unemployment. Some annuities guarantee a return of your premium. These riders are generally optional and may require an additional fee, and they may not be available on all products.

Another way to benefit from an annuity is to use it as a wealth-transfer vehicle. For example, fixed annuity income isn’t taxed until it is distributed. If you preselect a payment stream for a loved one, he or she can receive the income throughout a period of time to avoid a large tax liability as the result of a one-time, lump-sum death benefit.

Because they offer options for reliable lifetime income, annuities remain a popular option when creating an income plan for retirement assets. The following are some recent insights discovered by LIMRA Secure Retirement Institute’s 2017 Annuity Buyers Metrics study.

  • Annuities appeal to pre-retirees and retirees by addressing three major retirement income goals: asset accumulation, preservation of principal and predictable retirement income.

  • Individuals typically buy a guaranteed income annuity at or in retirement when they are at the peak of their income years or accumulated assets.

  • 80 percent of retiree households (with an annual income of at least $35,000) that own an annuity have more than $100,000 in investable assets.

Interested in reading more?  Here are some articles that may be of interest to you:

CLICK HERE TO READ THE ARTICLE “Using Annuities To Prep Clients For The Next Recession.”

CLICK HERE TO READ THE ARTICLE “Annuities Can Help Boomers Consider Wealth Transfer Plans.”

CLICK HERE TO READ THE ARTICLE “Buyers Look Past Marketing and Buy the Annuity’s Purpose.”

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Raymond C. Lantz, Jr. is the president and founder of USA Wealth Group, Inc. Ray has many years of experience advising clients in retirement and sophisticated tax planning strategies, multi-family and commercial real estate projects, and legacy planning. Ray is a graduate of Clark University, holds a law degree from Boston College, and a master of laws in taxation from Boston University. You can hear him every Sunday on Money Wise with Ray Lantz on WBSM 1420AM or on the Radio Pup app. 

Best Places to Live in Retirement

Many retirees believe the best place to live in retirement is right in their own home. Let’s explore some of the “best places” where that home might be located and what it might look like.

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It’s worth noting that the retirement experience varies widely. Some people have the money to relocate or buy a second home. Some people have plenty of retirement funds but choose to remain where they are. Come talk to us if you’d like help in creating a retirement income plan to assist you with figuring out what you may be able to afford.

According to a study by U.S. News & World Report on the top states for people 65 and older, Colorado is the best place in America to spend your retirement years. The study evaluated which states are most effective at helping retirees meet their health care, financial and community involvement needs.

If you have a specific retirement haven in mind, be sure to do some research about it. For health care services, for example, U.S. News publishes a guide to the best hospitals with a searchable database. To learn about a locale’s cost of living, consider the Council for Community and Economic Research’s Cost of Living Index. To get a feel for an area’s year-round climate, check out the interactive climate data tools at the NOAA National Centers for Environmental Information.

Relocating after retirement can be difficult for some people, especially those with close friends and family ties to an area. If this is a concern for you, consider a short-distance move. Perhaps move to a nearby town that has less hustle and bustle, and more outdoor and cultural activities. If your motivation is to downsize, you may even be able to do that in your own community. In this case, you can get rid of the big house and accompanying maintenance chores and expenses, but stay close to family and friends.

Consider where you might be able to access personal help as you age, and the best way to procure that help. For example, you could relocate to a neighborhood near a nursing or medical school, and hire a student to help you if needed. If you have an extra bedroom, consider offering free or low-cost accommodations in exchange for personal aid. Even when we don’t need help with health care needs, as we age it never hurts to have someone we know and trust around to help maintain the house and lawn, drive or run errands, or just check in for conversation.

Think long term – not what your health is like right now, but what it could be like 20 years from now. In other words, having stairs may increase your chances of a fall. They also will be difficult to use if mobility is an issue. For some, the solution may be to buy a single-story home with the idea of avoiding those potential problems.

Another option to consider may be to sell your home and rent a smaller home. This could allow a retiree to pocket equity from the home sale and keep expenses low enough for current income sources. Renting also may eliminate the risk of a large maintenance cost or unanticipated repair.

These are all long-term considerations people should think about with regard to the “best place to live in retirement.”

Interested in reading more?  Here are some articles that may be of interest to you:

CLICK HERE TO READ THE ARTICLE “Best States: Aging in America Ranking.”

CLICK HERE TO READ THE ARTICLE “Find out Where You Should Retire.”

CLICK HERE TO READ THE ARTICLE “Retirement Living: Renting Vs. Home Ownership.” 

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Raymond C. Lantz, Jr. is the president and founder of USA Wealth Group, Inc. Ray has many years of experience advising clients in retirement and sophisticated tax planning strategies, multi-family and commercial real estate projects, and legacy planning. Ray is a graduate of Clark University, holds a law degree from Boston College, and a master of laws in taxation from Boston University. You can hear him every Sunday on Money Wise with Ray Lantz on WBSM 1420AM or on the Radio Pup app. 

Innovating to Solve Problems

The 2017 hurricane season was one of the most active of the new century, and scientists are predicting hurricanes will likely get more intense in the decades to come. But these predictions for worsening conditions in the future may pave the way for stronger innovation.

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For example, the governor of Puerto Rico, which was devastated by Hurricane Maria in September, suggested the island rebuild its power resources into a microgrid. This strategy means that power outages caused by storms would be more localized so a huge area isn’t impacted when one system goes down. It also would accurately pinpoint which grids need repair and better assign resources so that power can be restored more quickly.

The microgrids could be powered by alternate and renewable resources such as wind and solar energy, which would be better for the environment and less expensive for residents. This type of innovation could avoid the need to completely rebuild infrastructure the next time a major hurricane hits the region.

There are two issues when considering the catastrophic nature of a disaster like a hurricane. The first is societal – how do we restore power and other infrastructure after a crisis? The second is personal – how do we recover when our homes are damaged or demolished? While we seek and embrace innovations that can lessen the damage caused and hasten our recovery, the current solution is to insure against losses that can devastate us financially.

Other issues that are cropping up in today’s society are spurring innovation. For example, researchers say the U.S. workforce participation rate is declining. In fact, a recent analysis found that one-third of prime-age men not in the labor force have a disability. Rising incarceration rates have impeded the workforce even after release, due to criminal records.

Furthermore, increasing numbers of baby boomers are retiring each day, and younger generations might not have, at this point, the skills and experience to take their place. With so many critical issues converging, who will work America’s jobs?

Enter robotics, artificial intelligence and machine learning. Today’s technology not only has robots and computers performing a wide range of routine physical work activities better and more cheaply than humans, but they are increasingly capable of providing cognitive insights that were once considered too difficult to automate. This includes sensing emotion, driving vehicles and even making decisions. Scientists project that automation is poised to change the daily work responsibilities for a spectrum of jobs, including miners, landscapers, commercial bankers, fashion designers, welders and even CEOs.

It’s worth considering both the pros and cons of automated labor. While this type of innovation may create a less expensive workforce for American companies, it also reduces the overall tax base. Which leads us to the question: Will the remaining human workers have to pay higher taxes to cover government programs and expenses, or will companies need to pay taxes on robot workers?

Interested in reading more?  Here are some articles that may be of interest to you:

CLICK HERE TO READ THE ARTICLE “Why This Hurricane Season Has Been So Catastrophic.” 

CLICK HERE TO READ THE ARTICLE “Puerto Rico is using an unusual method to restore power after the hurricane.”

CLICK HERE TO READ THE ARTICLE “What we know – and don’t know – about the declining labor force participation rate.”

CLICK HERE TO READ THE ARTICLE "Bye Bye Boomers: Who Will Fill your Workforce Gap?” 

CLICK HERE TO READ THE ARTICLE “Harnessing automation for a future that works.” 

CLICK HERE TO READ THE ARTICLE “Why robots should pay taxes.”

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Raymond C. Lantz, Jr. is the president and founder of USA Wealth Group, Inc. Ray has many years of experience advising clients in retirement and sophisticated tax planning strategies, multi-family and commercial real estate projects, and legacy planning. Ray is a graduate of Clark University, holds a law degree from Boston College, and a master of laws in taxation from Boston University. You can hear him every Sunday on Money Wise with Ray Lantz on WBSM 1420AM or on the Radio Pup app.