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Retirement & Planning for Income Needs Americans are living longer and spending more time in retirement. In fact, the average American will be retired for 20 years. Understanding how long you will be in retirement is one aspect that will help you understand and plan for your income needs throughout your golden years. The next step in preparing for retirement is determining your expected expenses including mortgage/rent, food/living expenses, health care (view our medicare supplements page), transportation/travel, inflation and taxes. Retirement income can come from multiple sources but you need to make sure there is enough to cover all your expenses. Your base income for the most part is provided through social security. Other sources of income may come from pensions, 401k/403b plans, IRA's or savings/investments. Your desired lifestyle in addition to the above expenses will determine how much additional income besides social security you will need. Click here for a worksheet that will help you write all of this out. Pensions are becoming a thing of the past with less and less employers offering them. With the shift to 401k accounts, you are more responsible for your retirement destiny. That means protecting your money is critical and the key question is how do you convert your savings to a reliable stream of income that will last? Other concerns you should be worried about are: Market losses - especially near or early on in retirement could be devasting to your savings and could push back your retirement start date. Longevity - will your funds be able to last a lifetime, especially when we are living longer? Inflation - a level payout would create problems later in life as a dollar today will not buy the same amount 10 years from now. (think how much gas has gone up in price) _________________________________________________________________________________ An annuity can put your mind at ease regarding the above concerns with protection and guarantees that provide: Market protection - your savings will not be reduced from market losses Market Participation - You can enjoy market returns without the risk of losing money in the market with certain types of annuities Guaranteed Returns - Minimum interest rates are guaranteed and optional riders are available that guarantee performance when determing lifetime withdrawal amounts Inflation Protection - Increasing your payout amounts each year will help you cover expenses and goods that become more expensive over the years. Lifetime income - You don't need to worry if your money will last as the income is guaranteed for your entire life and in some cases a spouse's life as well. Tax Deferral - Your money will grow tax deferred, meaning you won't pay taxes on the gains until withdrawals/distributions are made. This is in addition to any tax advantages from utilizing an IRA. Roth IRA's create tax free income. _________________________________________________________________________________ More about Annuities: "An annuity is a contract between you and an insurance company, under which you make a lump-sum payment or series of payments. In return, the insurer agrees to make periodic payments to you beginning immediately or at some future date. Annuities typically offer tax-deferred growth of earnings and may include a death benefit that will pay your beneficiary a guaranteed minimum amount, such as your total purchase payments. There are generally two types of annuities fixed and variable. In a fixed annuity, the insurance company guarantees that you will earn a minimum rate of interest during the time that your account is growing. The insurance company also guarantees that the periodic payments will be a guaranteed amount per dollar in your account. These periodic payments may last for a definite period, such as 20 years, or an indefinite period, such as your lifetime or the lifetime of you and your spouse. In a variable annuity, by contrast, you can choose to invest your purchase payments from among a range of different investment options, typically mutual funds. The rate of return on your purchase payments, and the amount of the periodic payments you will eventually receive, will vary depending on the performance of the investment options you have selected. An equity-indexed annuity is a special type of annuity. During the accumulation period ý when you make either a lump sum payment or a series of payments ý the insurance company credits you with a return that is based on changes in an equity index, such as the S&P 500 Composite Stock Price Index. The insurance company typically guarantees a minimum return. Guaranteed minimum return rates vary. After the accumulation period, the insurance company will make periodic payments to you under the terms of your contract, unless you choose to receive your contract value in a lump sum." Email: dpyzyna@pyfinancial.com |