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Why Annuities Are The Answer- And Are A Tough Sell

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Time Magazine presents a poignant article today that gets to the heart of why so many people are in dire straits with their retirement. I can safely say that if you’re a regular reader or client of Annuity Straight Talk, you’re taking action to ensure this sad fate does not strike you- The article underscores why we feel so strongly that we are on the right track assisting people securing guaranteed income.

The article highlights results from a recent Blackrock study that surveyed the confidence levels of both retirees, and employees approaching retirement. See the article here.

The decline of traditional pensions and steady erosion of Social Security benefits has begun to leave most retirees without a source of guaranteed lifetime income. Plugging that hole is emerging as the most important retirement issue of our day.

How do we solve this retirement income puzzle? Annuities are the answer.  But this statistic is perhaps the most telling. 

Good luck figuring this one out. When it comes to the one sure-fire solution—immediate fixed annuities—retirees have a split personality. According to research out of Harvard, 77% of retirees wish they had locked in a guaranteed income stream when they retired and 86% say their employer should have helped them arrange one. Yet almost as many (69%) say they prefer to keep control of their retirement assets.

You can’t have it both ways. No company is going to guarantee income for life without taking control of the assets standing behind the guarantee. “We need a national conversation on this issue,” says David Laibson, a Harvard economics professor. “We need to learn more about what people want.” His comments came during a press conference for the latest BlackRock annual retirement survey, which found that retirees with a guaranteed income stream tend be most confident about their finances.

The article continues and gives some of the reasons why the logical answer is not utilized as often as it should be.

There are many reasons that retirees shun annuities. They can be confusing and some are laden with fees, and as noted people don’t like to give up control over their assets even if it means securing income for life. Another stumbling block is the low-interest rate environment, which makes annuities seem expensive. It takes $737,000 for a 70-year-old couple to buy joint lifetime monthly income of $4,000, according to immediateannuities.com.

Yes, immediate annuities where you give up control and access to your money do have drawbacks, but no other investment pays mortality credits and pays as high a guaranteed rate.

The bulk of the BlackRock study discussed the change in confidence levels and security among retirees as the workforce shifts  from a defined benefit or pension driven retirements, to defined contribution and 401K driven retirements.  

With defined benefits, longevity risk is on the plan sponsor- the employer.  But the responsibility and risk is shifted to individuals in a defined contribution world.

No matter how you solve it, securing guaranteed retirement income is an essential challenge.  The best way to solve the problem is by shifting the risk.  An annuity is a private pension, and with it, you shift longevity risk back onto the carrier.  It’s that simple.

Don’t be among that 77% who wish they’re locked in more guaranteed income.  Take action today for that guaranteed income stream that instills the most confidence in your future.

Fixed Indexed Annuity

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The Fixed indexed annuity is a booming business. There are billions annually being converted into these annuities.

Fixed indexed annuities garner higher returns than a CD or money market account without giving up security. The Fixed Indexed Annuity is an annuity that allows for market participation without downside risk , and is quickly overshadowing CD’s, mutual funds and other stocks as a great safe place for people to invest their money.

How The Fixed Indexed Annuity Works

A fixed index annuity will provide at least 1-3% returns, compounded annually. This minimum guarantee lasts throughout the contract; however, earnings can exceed this rate.

Fixed indexed annuities are linked to the performance of another equity index like the S&P 500. The overall performance of the US stock market is represented by the S&P 500. If the market performs well, your  investment  will enjoy a percentage of the gains. If and when the market goes down however, you are sheltered from losses.

Fixed Indexed Annuities: Gains, But Not Losses?

Fixed index annuities sound too good to be true.  Well, they are real. When the market performs well, you earn a percentage of the gains subject to a cap. When the market goes down, you do not hold any of the risk and therefore do not lose any money. Every year, any earnings will be locked in at the anniversary index point. In fact, on particularly good years, a fixed index annuity can gain 2 or even 3 times the guaranteed interest rate and not lose any of those gains when the market subsides again.

Fixed Indexed Annuity: Tax Deferred Growth

The icing on the cake for fixed index annuities is that if all earnings are kept in the annuity they will grow tax deferred. You don’t even have income on a Fixed Index Annuity to pay taxes on until you take out the money.

While this product is for all ages, it is especially applicable to retirees.  Small business owners are using FIAs in their 401(k) and SEP-IRA retirement plans as well.

Learn more about this on the The Annuity Report by signing up below or to the right.  Or, explore these  pages on Fixed Index Annuities or these pages on their popular income- rider siblings, Hybrid Annuities.

Trust, But Verify

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When shopping annuity companies, we take a slightly different approach to Ronald Reagan’s motto.  We believe investors must be critical and learn how to Verify, before Trusting.

There are very few people you can trust with your retirement savings when considering annuities, and it only makes sense to learn a few things first.  Certainly, don’t trust annuity companies or annuity sales people.

Be critical of financial products, and learn to trust yourself. By educating yourself, you can make the best decisions for YOU- and you can learn how to screen all the other competing interests. Only then will you be a Smart Buyer and be ready to make an informed decision.

“Trust, but Verify” is great mantra for any confident person, and we give you the tools to Verify what you read and hear about Annuities.  Annuities, and the advisors who recommend them, must Verify against your knowledge and tools. Only then do these people and products earn your Trust.
Become a Smart Buyer- Empower yourself to Verify before you Trust.

So how do you do that?  It’s pretty easy.

Step #1 is to sign up for our Free Guaranteed Lifetime Withdrawal Benefit report. This free report is available to help you understand these popular products, and you may be surprised to learn some of their pitfalls. Simply fill in your name and email and we’ll send it to you right away.

Get Our Annuity Report Now!

Step #2 is to become a member of Annuity Straight Talk- membership is free and The Annuity Report is available to our members. This report outlines in detail the decision process and critical factors necessary in buying an Annuity.

Step #3 is a strategy session, available to our members. These simple questions help us see if an Annuity is right for you, and help us to design an Annuity solution for your needs.

When you have the tools to make an informed decision, allow us to recommend annuities that meet your specific needs. You will find our recommended products and companies come with the best combination of Safety, Flexibility, and Profitability for your situation.

Using Free Withdrawals In Annuity Contracts

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The Free Withdrawal from your annuity is a critical element in your decision process, and any Annuity buyer must carefully consider how they would use free withdrawals, and when.

Every annuity contract contains a clause allowing the free withdrawal of a certain percentage of the initial premium each year without a surrender charge. Individual states have laws that dictate a minimum percentage.

Typically, the amount of free withdrawal is around 10% and some annuities allow for a 15% free withdrawal.  On the flip side, there are products that limit the withdrawal to 5%.

High Quality companies offer more than the state mandated minimum.  Like most of the factors we discuss, this fundamental integrity and respect for customers permeates their contracts and earns your trust and your business.

Conversely, many annuity agents and companies will use bonus rates and higher minimum guaranteed yields to entice you into lower minimum withdrawal allowances. Is this in YOUR best interest?

Remember the Ground Rules ! It should go without saying that the bigger free withdrawals are good for the customer and the smaller ones are good for the insurance company.  Which would you choose?

Action Items:

If liquidity and control of your capital is important, be sure that your free withdrawals are as large as possible
Quality companies are not afraid of you withdrawing your money, and consequently don’t sink to the lowest levels allowed by law for your withdrawal allowance.
Remember, it’s YOUR money.