WALTER’S STORYDo you need income right away? If you have an amount of money from which you know you need to generate an income, then you want to be smart with these funds. Leaving it all in the stock market is risky because it’s not about IF the market goes down, it’s about WHEN. If the market takes a hit and you are also withdrawing funds for your income, then you are pulling money from a losing account. This is the exact recipe to follow if you want to outlive your money. There is a better way. Walter had $1.2 million in his 401(k) portfolio on the day that he left his job at the age of 62. Instead of leaving it all directly invested in the stock market, he moved a portion of this money into a fixed indexed annuity where he could accomplish three things: 1) He will be paid $8,300 of income every month, guaranteed. 2) His principal is guaranteed not to go down due to stock market loss. 3) He can revisit his goals after 10 years’ time and decide whether or not he wants to continue with this investment vehicle.
MR. AND MRS. KDo you have a known income need in about 10 years’ time? The Sequence of Returns is a mathematical phenomenon that directly affects people who near the time of retirement. Investors who lost money during 2008 are just now getting back to even. Who knows what is around the corner? Mr. and Mrs. K know they are at the high point of their financial life. Their business is a success and they have saved over $2 million. They know they want to be smart with this money because they need it for their retirement income. Working with a qualified financial professional, they moved a portion of their portfolio into a fixed indexed annuity with an income rider that is guaranteed to grow their money at a rate of 7 percent a year for the next 10 years. That means when they retire, they will have a guaranteed income of $125,000 a year that will be paid out to both of them for the rest of their lives, no matter how long they live. Now, they know they can afford to stay in paradise.
ABBY’S STORYDon’t need income? Want to grow your money without messing around with market risk? Abby inherited her husband’s investment portfolio: $250,000 in stocks, bonds, and mutual funds. She knows the stock market was good to her husband, but Abby isn’t working. She isn’t making deposits into these accounts and she doesn’t want to give any of this money away due to market loss. She wants to put it where it can grow, but instead of using it for income, she wants to save this money for her granddaughter. Does that mean that a fixed indexed annuity is not right for her? Abby’s financial professional tells her about the death benefit rider on a fixed indexed annuity. With this particular rider from this insurance company, she can grow her money safely for 10 years at a guaranteed rate of 8 percent a year. If she has an emergency, she can access 10 percent of her money without penalty at any time. In 10 years’ time, if she wants to put her money someplace else, she can. If she passes away during the next 10 years, her beneficiaries are guaranteed to inherit all of the money in the account.
WHAT’S YOUR STORY?If you recognize yourself in any of these scenarios, then you’ll want to find out if an indexed strategy is right for you.
- The pros: you get market-linked gains with 100 percent of your principal protected, guaranteed. You can also get a joint income or a single income guaranteed for life, no matter how long you live.
- The cons: the gains earned by indexed annuities are capped, so you want to work with a financial advisor who can look past all the marketing noise and tell you what your bottom line will be. If you have a specific income need, then you will want to shop around to find the best annuity for you.