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THE IMPORTANCE OF PLANNING FOR RETIREMENT
During these uncertain times it is critical to have a solid retirement plan. Whether you are developing a plan focused on income strategies or deciding on the best available option concentrated on growing your family's wealth, we are here for you. Our focus is to help you make the right decisions.
There are many retirement plans out there to choose from and the reality of it is a lot of them promote financial security and safeguards, but are these financial instruments right for your specific situation? Are you using them in the correct manner?
When planning for retirement you need to consider your future risks; health, longevity, and money. Are you just deferring taxes without considering your tax liability later on? You have to consider how taxation, fees, and regulations will impact your income. What about, how it will impact your spouse, if you were to prematurely die or get sick? You also have to think about your family and the legacy you want to leave behind.
DOES YOUR RETIREMENT PLAN OFFER THESE BENEFITS
Guaranteed Income for Life
Did you know that certain strategies afford you a guaranteed income for life?
Is your retirement plan tax efficient?
With tax rates expected to rise as we get older, is your retirement plan tax efficient? What if there was a way to opt out of the tax system and enhance your retirement savings? There is no doubt taxes will have a major effect on your spendable income, hence why it is important to plan ahead and mitigate these risks and make sure you have enough money in your retirement. It's not just about growth… Your plan must also be effective and tax efficient.
Do you want a guaranteed income for life?
Is your retirement subject to stock market risk? The securities market is too volatile, yes high risk does come with big rewards, but if you are near retirement a severe stock market adjustment can devastate your lifestyle.​ You can't refuse to overlook these risks. The best way to circumvent systematic change is by planning appropriately. You need to consider your risk tolerance and timing, the idea is to minimize your losses and have short term strategies that coincide with your long term plan.​ Do you want a guaranteed income stream for life?
A plan without contribution limits.
The IRS sets contribution limits on traditional retirement accounts such as Roth's, IRAs, 401(k), 403(b), etc. This leaves many affluent savers looking for alternative methods to build their wealth. If you're one of these individuals, we can help you develop a plan that allows you to maximize your retirement contributions without the limitations thus allowing you to fully capitalize your retirement the way you want.
What are annuities?
Annuities are retirement instruments, a contractual agreement between a financial institution and policy owner that promises to pay a specified amount in the future. These financial products can be funded in a number of ways. The first method is by making a lump sum payment to purchase the contract (a single premium) and the second method is is funded with recurring deposits for a specified time.
Annuities can be used in many strategic ways. Unlike other financial instruments, annuities can provide a guaranteed income stream for life, which is what makes it an attractive retirement tool for many affluent savers. This allows the annuity owner to mitigate longevity risk, addressing the risk of out living their savings.
What are the advantages of investing in annuities?
Aside from a guaranteed income stream for life, annuities can also provide income for a certain period elected by the policy owner. Period certain distributions are sometimes used to fill gaps or used as supplemental retirement income. Depending on your plan, annuities can be used in a multitude of ways, but this is not the only reason why it is a viable alternative to mainstream financial products.
Indexed annuities are financial products that are not directly invested in specified securities, instead it's growth and potential is linked to an elected index, like the S&P 500. The biggest advantage of owning indexed annuities is the growth potential and zero level floor protection. This means when the market is up, annuity owners earns and when the market is down, the annuity owners enjoy zero level floor protection. In other words, annuity owners cannot or will not have negative returns, the most they can gain or lose in that situation is 0%.
Unlike other retirement options (401k, 403b, 457 etc.), annuities do not have contribution limits. It allows individuals to contribute more. Having no contribution limits makes this retirement tool very favorable, since it also offers many tax advantages. First, growth within an annuity is tax-deferred. Secondly, taxation on distribution of an annuity is only based on the earnings. In addition, contract riders like a death benefit provision can be added (at a cost) that will allow annuity owners to designate a beneficiary to inherit the remainder of the annuity (Just like the owner, only the growth is taxable). This is important since other financial products after The Secure Act forces beneficiaries to receive the proceeds within a 10-year period. Depending on the amount received, even if spread out throughout that time period, can mean a huge bill for the beneficiary.
Which retirement plan is better, Roth IRAs, Traditional IRAs, 401(k)/403(b), or Annuities?
To be honest, every financial product has its own benefit. For starters, they, all promote financial stability, but they are not all the same nor are they built equally. Traditional products offered through employment may come with matched benefits which is essentially free money and nobody should turn away free money, but if your contributions are too much, free money or not, it defeats the purpose since you will be losing it to taxes. Roth IRA accounts in essence are tax-free which is great, but with contribution limits so low, it can't really provide you with all your needs in retirement.
Retirement planning is important and essential, but it is not about what tool is superior to the other. It is more about what financial plan and strategies suits the retiree and their family. Financial planning is not a one size fits all solution and there is not one instrument better than the other, they all have different benefits and disadvantages. The critical part is making sure that all moving parts of a plan compliment each other to fully maximize the retirement benefits received, and annuity products utilized in the right manner can compliment every financial plan.
Common questions about Fixed Indexed Annuities
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