The Most Tax-Friendly Retirement States


Many people we speak with have considered moving to a new state for retirement in order to lighten their tax burden. When you really think about it, some states take 10% or more which can have a substantial effect on retirement cash flow. If you’ve ever wondered whether your dream retirement locale might leave you with more spendable cash then you need to read this recent article from MarketWatch… find it here.

The article lists the seven most tax friendly states as well as a few things to consider if you are seriously thinking about taking the leap. Many of the biggest breaks are found in states that exempt pension and social security income from tax reporting. Also, there are those with no sales tax while others may be beneficial because of the absence of income tax altogether. By weighing this against potential changes in property taxes, you should be able to figure out if the move is worth if financially.

Of course there are other reasons why moving to a new place might be appealing. Family, weather, real estate and recreational opportunities may be motivating factors alone. But a little more cash in your pocket sure wouldn’t hurt the situation.

If there’s still a doubt in your mind, perhaps you can take a spring vacation to see if a potential retirement community catches your attention. When it’s time to figure out how to fund the whole thing, well… that’s what we do best.

As always, feel free to call or email at your convenience.

Have a great week!

Bryan J. Anderson
[email protected]

Are Pension Forecasts Too Optimistic?


Pensions- in generations gone by- were a staple of the workplace.  Work for the company for your careeer, and get rewarded with a retirement pension.

As you paid in with time and money, the company matched and paid in with money and hired people to manage those funds and dole it out.  We know the theory… but what about the people behind the scenes running the money?

This distressing WS Journal article indicates some overly optimistic managers at the helm.

If you were a better stock picker than Warren Buffett, would you be punching the clock every day as the faceless manager of a corporate pension plan?

Judging by many companies’ recent financial statements, they must believe their pension plans are run by such unheralded baby Buffetts.

These expectations for future stock returns at major companies remain stubbornly high—often between 12% and 16%, or nearly twice what Mr. Buffett himself seems to believe the pension plan he oversees can earn on stocks. Such rosy hopes may not survive the collision with reality.

While the article concerns itself with future profits, if I  was a retiree depending on a pension, I’d be more concerned with liquidity and solvency than profits.  Making up for decades of over optimistic assumptions, compounded, can be impossible.

Of course, it’s just another good reason to put your own private pension in place to safeguard.

The article concludes:

With the S&P 500’s dividend yield at 2% and the long-term growth rate of dividends and earnings at 4.5% (including inflation), a sensible expectation for long-term annual stock returns is roughly 6.5%, says William Bernstein, an investment manager at Efficient Frontier Advisors in Eastford, Conn.

You should leave the fantasies of higher returns to the professionals—who probably won’t achieve them anyway.

Now with professionals, and Warren Buffet himself, braced for a long term yield from equities in the 6.5% range, and with all the volatility and risk that brings, why wouldn’t you seriously consider a stable annuity paying a similar yield?  Of course I’m referring to Secondary Market Annuities in this case, which routinely have yields in the 6.5% range, but the same logic can also apply to Index Annuities as well, with attractive yet no risk market participation.  

Give up a lot of volatility for a little yield, and gain a lot of safety and peace of mind…  That’s the premise of an annuity driven retirement.  Contact Us to get stated building your guaranteed income stream.


The $440 Billion Pension Gap


This distressing article highlights the issues pensions face meeting their promises to retirees.  According to the article, 14% of the nations workforce still participates in some sort of employer sponsored, defined benefit plan.  Yet, "The third quarter 2011 was the second worst in history for pension liabilities," due primarily to unrealistic assumptions and enduring low rates of return.

Is your pension in a similar state?  Or worse, are you hoping for year after year of 10% compounding gains to rely on to turn into income?  It might be time to rationalize expectations, and put true guaranteed income in place.

Judicious use of annuities can provide the floor of security and income for individuals.  It only makes sense to use your assets to lock in the security you need, and not rely on underfunded pension plans that can’t come to grips with economic reality.

Here's the article:

It’s been a tough year for corporate pension plans. Weak stock markets and falling interest rates have left a $440 billion hole in the nation’s 100 largest plans, with the shortfall more than doubling in the third quarter…. Read On.

Source: WSJ

Re-Sale of Pension Income- Wall Street Journal


A recent article in the Wall Street Journal revealed another secondary marketplace- that of secondary pension re-sales.

This is a relatively new but growing industry that seems to be skating a fine line of laws.  It's our understanding that ERISA- the laws that govern pensions- prohibit this sort of transaction.  We're not experienced in this marketplace and of course would recommend any reader to proceed with caution.  Please let us know your experience and we welcome any comments or discussion below.

A U.S. Senate committee is considering tackling a burgeoning and controversial business in which veterans and other retirees sell some of their future pension income to investors, with an array of middlemen profiting from the transactions.

"The sale of pensions to investors in secondary markets is a worrisome new practice that deserves careful scrutiny," said Sen. Tom Harkin, chairman of the Health, Education, Labor and Pensions Committee. "In tough economic times, hard-working people are often forced to make difficult choices between immediate economic needs and their future retirement security.

"However, it is critically important that people forced to make these tough decisions have the information they need to make wise choices, and don't fall victim to unscrupulous or illegal practices."

Mr. Harkin, a Democrat from Iowa, said he plans "to take a closer look at these issues in the coming months to ensure that our laws are respected and pension participants are not abused." A committee spokeswoman said it is early in the process, and the senator declined to elaborate on possible courses of action.

As The Wall Street Journal detailed in a story earlier this month, financial middlemen have helped to set up websites with names such as and to connect pension recipients.

The pensioners need immediate cash; the investors are lured by promises of higher returns.

The market plays off several current trends: With tougher credit standards, many people who ordinarily might borrow from credit cards are willing to pledge future pension checks for cash now, even if the terms are highly unfavorable to them.

Many people who never previously considered unconventional investments are attracted to them with bonds paying ultralow yields and stock markets a highly risky bet.

The financial middlemen bundle information obtained by the websites into spreadsheets that are supplied to financial advisers for their clients. The investor pays an agreed-upon lump sum to the retiree, who signs a contract pledging to hand over all or part of each month's check for a set number of years. The deals typically are priced to yield investors 6% to 7% or so a year, as their money is returned over a period of several years to 10 years.

Meanwhile, an array of middlemen collect fees: They are spread among the website operators, firms that do the heavy lifting of pulling together transactions, distributors and the financial advisers who land individual investors.

No one keeps track of how many pensions are traded for instance cash, and the number for now is believed to be small. But in recent months, websites have proliferated, and middlemen far from Wall Street have ramped up efforts to win over financial advisers to the concept.

These firms have their eye on the hundreds of thousands of military veterans, police officers and firefighters who can start receiving pension checks while they are still in their 40s, many of whom have moved on to other jobs and wouldn't be put in desperate financial straits if they pledge some of their future pension income for a wad of cash.

The deals attempt to thread the needle of federal pension law and federal statutes governing military pay, which prohibit the "assignment" of qualified pensions. The transactions attempt to make the distinction that the pension itself isn't being assigned but that the retiree is promising to fulfill a contract and will use money he or she has received from a pension check.

But that makes the transactions risky to investors because the retiree could breach the contract or file for bankruptcy, putting investors in a line of creditors seeking to be repaid.

Pension-income-stream transactions arranged by a California firm that has been in the business since the 1990s have been enforced by some courts but rejected by others, including a U.S. bankruptcy court, filings show.

Source: WSJ

Funding The Post Pension Retirement- Wall Street Journal


The weekend Wall Street Journal brought us another piece that underscores the need for stable lifetime income in retirement.   Fewer and fewer people retire with employer pensions, yet we all must plan for retirement that may stretch into our 90's or longer.  The article says:

Far more people will retire without pensions and will need to rely on their accumulated savings to pay for everything that Social Security doesn’t cover.

So how will you turn those funds into the monthly income you will need to pay your bills? The answer is murky at best.

Previous generations built "ladders" of bonds with staggered maturities and invested in dividend-paying stocks, expecting to live solely on the returns. But low interest rates and a volatile market have made those strategies difficult

The article continues with good pointers and explores the pitfalls inherent in relying on any one strategy alone.  It should sound familiar to regular readers of Annuity Straight Talk.  Our pages on building your own Private Pension explore the  topic thoroughly.

The Lifetime Income Answer:

It doesn’t take extensive analysis by The Wall Street Journal to get to a Main Street common sense conclusion: In retirement, individuals need to convert their assets into income, and need it to last a lifetime.  And in to be in harmony with their risk tolerance, they should find as strong a guarantee as possible to absolutely, positively ensure that they can never run out of income.  That is a secure retirement. 

Turn that statement around for a second- if you are comfortable facing the chance of losing a significant portion of your assets in a stock market downturn, and possibly being forced to radically alter your standard of living to suit your diminished means, then by all means, stay invested in the markets. 

Hopefully, this illustrates that a more prudent strategy is to lock in enough income to guarantee your base standard of living.  Take care of housing, food, and cost of living with Social Security, annuities, and/or pensions- and then leave your remainder assets invested in the markets, real estate, or other endeavors.  That way, when the next market crash comes, you will have insulated yourself from the most dire consequences.

The Journal closes with this advice as well:

Ultimately, we may have to become as alert to retirement asset-allocation and withdrawal strategies as we have become at investing and accumulating. Depending on how much you save and how much you want to spend, you may find you want a mix of products and services.

A mix of products and services is definitely appropriate, and will vary for everyone.  No one size fits all.   Annuity Straight Talk stands ready to assist you in devising a lifetime income strategy suitable for your needs.  Give us a call at 800-438-5121.


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Private Pension Series Recap


Over the past several weeks we’ve taken an up-close look at how pension income is the central core of a retirement income plan.  The purpose of the series is to highlight the important considerations to address when crafting a private pension plan of your own to convert a lifetime of savings into an income stream that will fully sustain you in the years ahead.

I’d like to revisit the main points of this series before getting we jump into into the specific proactive step.  So, here’s a snapshot of what we covered based on excerpts from the series.

Part I:  The Value of Pensions

Why is a pension such a good thing?

Guaranteed lifetime income from a pension ensures stable cash flow across all years of retirement.  Now there are several challenges to contend with that will decrease the power of that cash flow but that’s precisely the overriding benefit.  A stable base of income will allow more flexibility with other assets so you can focus more on growth to provide adequate funds for any obstacle you meet in the future.

The importance of guaranteed income is further reinforced when you take into consideration the various challenges that make retirement planning difficult.  So we continued with…

Part II:  Financial Threats in Retirement

The intention here was to outline the issues that will threaten a poorly crafted plan.  When working to plan for longevity risk, market volatility and inflation the actions you take now must be calculated and deliberate for the following reasons…

No one knows how long each of us will live which makes it difficult if not impossible to determine appropriate spending levels.  No one wants retirement income to be subject to the whims of Wall Street.  No one has a clue what a dollar will buy in 20 or 30 years.  That’s why everyone needs and should want a stream of guaranteed lifetime income.  The major benefits are knowing you’ll never run out of money, you’re not dependent on market performance and additional assets are accessible when you realize that paycheck doesn’t accomplish what it could years ago.

The importance of planning for these threats is apparent and traditional asset management has long been considered to be capable of meeting the challenge.  In the name of prudent decision making, a closer examination of that line of thinking is mandatory, which led us to the following post.


Part III:  Tradition Asset Management Doesn’t Work for Retirement Income Planning

I’ll never ask you to take my word for it.  In this installment several studies were offered as a reference that allowed me to conclude with this statement:

The biggest problem to this [Traditional Asset Management] approach, in my opinion, is the fact that a single strategy is applied to planning for the major financial threats we’ve talked about, namely longevity risk, market volatility and inflation.  It all depends on the mood of the market, and not just now but every day for the next 20 or 30 years.  If you had a choice, when would you like your retirement income to be reduced?  I vote never.  I’ll repeat myself; the traditional approach to retirement income planning has absolutely no guarantee of success.

There is a stark contrast between the methodologies, risks and benefits of asset management and income planning that denotes a necessity to approach each of those targets from a different angle.  That led us to the solution in the next post.

Part IV:  The Pension and Annuity Answer

Again, several academic studies were provided to give you a solid base of knowledge to use in this important decision making process.  Here’s what they had to say:

These studies combined speak directly to the central point of The Pension Series which highlights the benefits and necessity of guaranteed income.  In essence, cover your basic expenses with a source of guaranteed income you can’t outlive.  Annuities allow you to do that more efficiently than any other asset class which allows you to allocate additional assets to optimize portfolio growth over time.  Continued portfolio growth gives you the flexibility to ride out market corrections and makes additional funds available to provide for financial emergency or future inflation.

That brings us right back to the beginning where we looked at the variety of benefits you will receive after securing a source of guaranteed lifetime income… stable cash flow through retirement, flexibility and growth with additional assets.  It’s not only the safest route to take but also the most profitable.

The Next Step: Design Your Own Private Pension

Now it’s time to find the most efficient source of income for your situation.  It’s never as simple just picking a product.  There are a wide array of considerations that need to be made for your specific situation.  This is a serious task that takes more time and consideration than a 'product salesman' can offer.  In the next post I’ll detail those considerations so you can get started on the path to long-term security.

Be on the lookout tomorrow for a set of guidelines you’ll want to follow when designing your private pension.

Thanks for your time… have a great day!

Bryan J. Anderson

800.438.5121 [email protected]