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Guaranteeing Lifetime Income and Annuities/Retirement Planning

Many of us worry about outliving our money during retirement. Even if you’ve saved diligently and socked away a few million dollars, lifespans are increasing, and the cost of living is constantly on the rise. To help combat these concerns, insurance companies have created products to ensure that you won’t outlive your money. The most common of these products? Annuities with living benefit riders. Let’s go over how guaranteed lifetime income and annuities retirement planning can help you secure your financial future.

So what exactly is an annuity? At its most basic level, an annuity is a series of payments. The way it typically works is the owner makes either one or a series of purchase payments during the accumulation phase. Then, at some point in the future, principal and interest are repaid during the distribution phase. Annuities come in many flavors, including fixed, variable, or equity-indexed. Because of the risk involved, we do not offer variable annuities and are not licensed to offer them.

Living Benefit Riders

A guaranteed lifetime income rider is available with many different annuity contracts. It works similarly to a pension or Social Security payment in that the longer you wait to turn it on, the more income you typically receive. If turned on at 65 years old, you can generally get somewhere in the ballpark of 5% of your  income base or income value for life. If you wait until you’re 70 or 75, that figure often jumps to 6%. The nice thing about guaranteed income riders is that even if your annuity is fluctuating in the stock market, your retirement income will be guaranteed. In addition, some of the more popular lifetime benefit riders include income doublers that can double income on a guaranteed basis for up to five years if you need home healthcare or skilled nursing care and meet certain requirements.

Annuity Maximization

On the other end of the spectrum, you may have annuities that you don’t plan on using, meaning you don’t need to draw income from them to live. If this sounds like you, we encourage you to start taking distributions, which will include the interest you’re earning each year, paying the income tax, and using the proceeds to buy a life insurance policy capable of creating generational wealth. This is similar to the programs we use to maximize IRA accounts, pension payments, and Social Security payments.

Case Study 1: Mary’s Retirement Security

Mary, aged 62, is approaching retirement with a considerable nest egg saved up over her career as a teacher. However, she’s concerned about the longevity of her savings, especially considering her family’s history of longevity. She decides to consult with financial advisors at Howard Kaye to explore her options. After discussing her goals and risk tolerance, Mary opts for a fixed annuity with a guaranteed lifetime income rider. By waiting until she’s 65 to activate the rider, Mary ensures she’ll receive a higher percentage of her income base for life. This strategy provides her with peace of mind, knowing that regardless of market fluctuations, she’ll have a steady stream of income during retirement.

Case Study 2: John’s Wealth Preservation

John, aged 58, has been diligent in his savings and investments throughout his career in finance. He’s accumulated several annuities that he doesn’t plan on tapping into for his retirement income. Instead, he’s more focused on preserving and passing on his wealth to future generations. After consulting with advisors at Howard Kaye, John decides to start taking distributions from his annuities, paying the income tax, and reinvesting the proceeds into a life insurance policy. This strategy allows him to create generational wealth while also maximizing the value of his annuities for his heirs.

Additional Information on Guaranteed Investment Options and Annuity Popularity:

Aside from annuities with living benefit riders, there are other guaranteed investment options available in the market, such as government bonds, certificates of deposit (CDs), and certain types of life insurance policies. However, annuities have gained popularity due to their unique combination of features. Unlike many other investment vehicles, annuities offer the advantage of a guaranteed lifetime income stream, which can help alleviate the fear of outliving one’s savings during retirement.

Additionally, annuities provide tax-deferred growth, meaning investors can potentially accumulate more wealth over time. The flexibility of annuity products, with options like fixed, variable, or equity-indexed annuities, allows individuals to tailor their investments to their specific needs and risk tolerance levels. Overall, the combination of guaranteed income, tax advantages, and investment flexibility has made annuities a popular choice for retirement planning in today’s uncertain financial landscape.

At Howard Kaye, we want to find a solution that works specifically for your needs. If you’re the sort of person that wants the peace of mind of knowing that your retirement income is guaranteed, an annuity with a living benefit rider may be right for you. Contact one of our advisors today at 800-DIE-RICH to learn more.

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