Running out of money is still one of the greatest fears people have at they deal with retirement. With the average life expectancy going up to 78 years old in the United States, we are seeing many retirees having to go back to work now as their hard earned savings and low interest bearing money market accounts are not enough to help them maintain their standard of living.
What’s interesting is that the people who have held positions that give them a stable pension today seem to be very happy knowing the check is in the mail. The people who worked for corporations for many years without the security of a pension, but had lump sum monies from stock and 401(k) plans are the ones who are sweating bullets today.
In the media, the word of annuities has largely been a voodoo term. The pundits on television like Suze Orman have been naysayers of these types of vehicles because of their high internal costs and hefty sales commissions earned by the villains in the financial services industry. In the major newspapers, every article that got written before just a couple of years ago pounded annuities into the ground as just a high-priced product that served nobody’s interest except the annuity company. Maybe only Ben Stein came the rescue saying annuities are not such a bad idea.
With the annuity market the way it is today, there are two serious considerations everyone should take a look at with the retirement assets if your goal is to not run out of money in retirement. Today, there are more centenarians in the United States than ever and that number is growing in leaps and bounds every year.
Although nobody likes giving up control of their assets, one consideration is to look at an immediate annuity. This is where you essentially would turn your assets over to an insurance company in return for an income stream that you could not outlive. These immediate annuities can be set up for you only, you for a certain period of time, or for you and your spouse depending on the type of immediate annuity you choose. You want to make sure you do business with a highly rated insurance company and shop interest rates so you get your best deal. One consideration to toss around is how you would feel emotionally about being able to enjoy your retirement if you didn’t have to worry about the check being in the mail every month.
A second idea is to purchase a variable annuity that either has a guaranteed minimum withdrawal benefit or it has a lock-in provision for income on a daily basis. Since retirement monies can go up and down in value based upon your overall investment strategy, the big concern many retirees have is how they will maintain their income if the stock or bond market goes down over the long term. With annuities that have a lock-in feature, you can still generate lifetime income of off the locked in value even your actual account value has gone lower over a number of years. Today, there are many different carriers that offer these types of products. Each product has its own unique set of bells and whistles, but having a portion of your retirement money in one of these annuities may help give you some relief as was seen in the recent market downturn in 2008.
Nobody wants to run out of money. It’s hard enough building a nest egg during your working years. Think about the happiest people you know who are retired, and I think you’ll find most don’t worry about when the check is coming in the mail. They know where their fixed income is derived from on a monthly basis, and that allows them to plan their lives no matter what the ups and downs are in the market. Shoot me a note and request a FREE consultation at www.oxygenfinancial.net if you want to talk more about this strategy as part of your overall retirement plan. Add A Comment
Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
Co-CEO and Founder oXYGen Financial, Inc.
oXYGen Financial, Inc. co-CEO Ted Jenkin is one of the foremost knowledgeable professionals in giving financial advice and Smart Money Moves to the X and Y Generation.
Phone 1.800.355.9318 or 770.777.0427
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