Let’s discuss the traditional financial model. The analogy I want to use is a three-legged stool – pensions, personal savings, and Social Security. Many corporations today have gone away from the pension in lieu of a 401(k).

Even if you are lucky enough to have a pension from a large corporation or a government, if the pension fund is miss managed, like occurred in Detroit in 2014, that money can be reduced. I mean, they still pay, but it can be reduced due to financial solvency. The first leg of the traditional financial model is either a pension or 401-k.

The second leg is personal savings and that can include investments, life insurance, checking accounts, savings account, bonds, so on and so forth.

The third leg is social security.

When we retire, we want add stability to the hazards that can befall that traditional three-legged stool.  The hazards that can upend our retirement due to something we never counted on. Miss management of your 401-k by yourself or your money manager or the pension by the organization that manages this money. You might recall when Orange County California filed bankruptcy, it was the largest municipal bankruptcy in the history of the country back in 1994. One of the wealthiest counties in America.

My suggestion, we can use an annuity to create a 4th leg to your stool. It is your personal pension. You purchased the annuity from a life insurance company. It can either be a lump sum or multiple payments. Your money can grow tax-deferred until you begin your withdrawal. Most people that own an annuity begin withdrawals between age 59 ½ to 72 today. But this is under your control when you begin withdrawals unlike Social Security which has a definite time limit.

The other benefits an annuity can provide is a protected lifetime income, protected from market loss, guaranteed to pay you and your spouse a guaranteed income for both of your lives. The annuity can provide you with a death benefit if you pass away prematurely.

You might not realize this; you have already signed up for an annuity from the government and it’s called Social Security.  Between the age of 62 to 70 you can turn on your Social Security benefit, assuming you have contributed and have accumulated at least 40 credits. Social Security will be paid out to you for the rest of your life.

Well, annuity works kind of the same way. But it is a little bit better.

I want to kind of change your thinking on how you look at an annuity and consider it more like a personal pension and not a financial product. Let’s focus on the guaranteed income part of the annuity. The income rider in an annuity offers you three very powerful benefits that you cannot receive from any other financial product.

The first guarantee is a guarantee of accumulation. When you place money into an annuity contract, if you’re not turning on the income right away, your annuity income rider comes with a guaranteed accumulation period.  The accumulation period can be as short as 5-years up to 20-years. The amount the insurance company will credit your income rider annually ranges from 6% to 10%.

The second guarantee your income rider provides you is a guarantee of distribution. You’re at the stage now where you want to turn on your income for life, the insurance company will ask you do you want to cover a single life, or if your married, you can choose to cover two lives. This is income that will never run out as long as you live. Keep in mind Social Security doesn’t offer this it is only for one life.

Here is the final guarantee an annuity provides you. They guarantee that they will pay this to you even if your cash that you have in the policy were to run out. You live a long life, your cash in the policy has been spent down. The insurance company continues to pay per the contractual obligations that the insurance company agreed to when you took out this policy.

Finally, let’s say you never get to draw down the money, you pass away first. Your heirs will receive a death benefit that they can choose to receive in a lump sum or anytime over the next ten years of you passing away. To lower the income taxes, they could choose to draw it at 10% for the next ten years or wait until the tenth year and draw a lump sum then.

The money you placed into this annuity can come from idle cash just sitting around, an IRA a Roth IRA or even a 401-k from your employer.

Here is an interesting case study, I have two clients, Client One and Client Two. They have personal savings invested into the stock market. So, the stock market takes a huge dip and Client One is on the phone, they’re panicking, they’re calling their advisor. ”Hey, what’s going on?” They’re watching the news. You know, they’re sweating because their nest egg is in the investments.

Client Two, same thing, they have Their nest egg in the investments as well, but there’s a difference. The reason they are not panicking, not worried. They’re not checking the news and calling their advisor every five seconds.  Because unlike Client One, they have some of their funds in an annuity.

If you use your pension, Social Security and your annuity income that you receive monthly to cover all of your essential expense that you have monthly, you are not worried about the downs of the stock market. You can let your market investments wait until the market recovers.

But, you know, the peace of mind guaranteed income that you receive monthly, come rain or shine, this money is not subject to stock market volatility. You will receive your guaranteed income every month and it will never stop until you stop. You cannot outlive it.

Number one fear of baby boomers is outliving their money. Don’t let this happen to you. Set your retirement up to receive guaranteed income to cover all of your essential expenses each month. Have other money in investments – stocks, bonds, mutual funds and real estate. This will continue to grow your assets over time and provide you with the perfect blend of guarantees and risk for a successful retirement.

Are you ready to look at the many benefits of guaranteed income in retirement, call Mel Samick at 888-839-3536.

Thank you,


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