Weekly Newsletter

Every New Year we think about our resolutions, which typically includes some promise to better ourselves. Pledging to go the gym more, eat healthier, be more active, spend additional time with friends and family, and decrease our social media intake, are a few that usually make the list. However, one resolution we should all emphasize as we ring in 2019 is finding ways to become financially savvy.

In fact, this resolution is becoming increasingly important. Indexed Annuity Leadership Council (IALC) conducted data in March 2018, which showed almost one-fifth of all Americans approaching retirement are at the low end of the readiness spectrum (not ready at all). This means they have saved 20 percent or less of the money they will need for their golden years, which is a problem they need to find ways to address. So, this year, considering making a Retirement Resolution (and actually sticking with it):

Follow a few easy tips to help you stay on track throughout the New Year:

1. Set Short Term Goals.

   Instead of thinking of a total amount you’ll need saved by the time you retire, start small. For example, set aside $30 a week rather than $30,000 in a year. While it might not seem like a lot initially, a little can add up fast. These customizable calculatorswill help you see how your small savings adjustments could make a real difference for your retirement future.

2. Change Your Date Night.

   Instead of going out to eat every Friday night, try making dinner at home twice a month instead. The money you save on cutting costs from eating out can be directly deposited into your retirement account.

3. Set Up Automatic Payments.

   It’s easy to say you’re going to diet, but following through with a diet is a lot easier said than done. It can be the same with savings. Here’s an easy tip: set up automatic transfers each month so you won’t be tempted to spend the money you allocated to put toward savings on something else.

4. Improve Financial Literacy.

   No one expects you to be a financial expert. But, there are small steps you can take to learn more about ways to manage your money. Start the New Year by reading up on how to achieve your personal finance goals. A financial professional is also a great individual to answer any of your questions.

5. Add to Your Retirement Portfolio.

   While investing in a 401(k) is a great start to a retirement portfolio, don’t put all your eggs into one basket. This New Year think about adding other vehicles that not only help you diversify, but also guarantee lifetime income, like a fixed indexed annuity (FIA).

   https://fiainsights.org/retirement-savings-resolutions-for-the-new-year-2/

By Emily Brandon, Staff Writer

Workers with an older retirement age get smaller Social Security payments throughout retirement.

What’s on your loved one’s gift wish list?

Are they asking for the latest technology? Fashionable apparel? A must-have toy?

No matter the buzz-worthy item, what they may want consider is a gift that lasts a lifetime. Remember, it is just a matter of time before a new version of their favorite technology enters the market, a different clothing trend is seen everywhere, or a new toy makes the hot toy list.

So this holiday season, consider giving a gift that is sure to not be replaceable – a financially secure retirement.

The path to a financially secure retirement begins with the savings vehicles that make up your financial portfolio. Therefore, we encourage you to consider a financial product that is explicitly designed to guarantee lifetime income, no matter the length of retirement. A fixed indexed annuity (FIA) is a perfect savings option to help meet this need.

Here’s seven quick reasons FIAs can help with financial security:

1. Create a foundation of conservative growth, and are a valuable piece of a financial strategy.
2. Offer nest egg protection from market downturns.
3. Add balance to a retirement portfolio.
4. Can offer tax-deferred growth.
5. Transform retirement savings into predictable income.
6. Do not directly participate in the stock market.
7. Allow you to receive a set income monthly to help cover expenses after you stop working.

A financially secure retirement could just be the gift your loved ones didn’t realize they should put on their wish list, especially when our retirement-readiness research shows that Americans are, above all, looking for lifetime income (nearly 80 percent).

This holiday season, help your friends and family feel comfortable and secure about what lies ahead. Talk to them about retirement savings vehicles that offer lifetime income and show them how FIAs can truly benefit their retirement.

https://fiainsights.org/holiday-wish-list-2018-financial-security/

Discover our most frequently asked questions about fixed indexed annuities (FIAs). Get the answers you need to help calculate your path to retirement.

What is an annuity?

Coming to you from the Indexed Annuity Leadership Council (IALC) is a new recipe to add to your Thanksgiving menu. We all have our Thanksgiving favorites, from turkey to stuffing, to sweet potatoes, pumpkin pie, and more. But as you sit around your table reflecting on all you have to be thankful for, we encourage you to also think about your recipe for a happy retirement.

Retirement brings Americans many joys. After years of hard work and dedication to the workforce, your golden years is a time to travel, visit friends and catch up on all the things you never had time to do. It is a time to enjoy your hobbies and not feel like you are in a rush and most importantly, it is when you have time to spend with your family. Because of all this and much more, it is not surprising our data on the state of America’s workforce found that 57 percent of Americans are excited about the years ahead.

So, as you’re cooking up your Thanksgiving favorites, we encourage you to consider throwing this new recipe into the mix. These ingredients like contributions to an employer-sponsored 401(k) program or to fixed indexed annuities (FIAs) can create a deliciously balanced portfolio that can keep you and your family financially full for many Thanksgivings to come.

Check out this Thanksgiving Retirement Recipe from the IALC:
Succulent Savings
Serves: You and your family
Nutritional Information: Guarantees are dependent upon the claims-paying ability of the issuing company.

Instructions:

Step 1: Measure your spending with our customizable retirement calculators. Begin by identifying all your expenses, including lifestyle, healthcare, etc. and create a budget. Be sure to include a healthy splash of saving for retirement in your monthly reoccurring expenses. This ensures that you are putting something toward your retirement savings each and every month.

Step 2: Combine your employer’s retirement plan into the mixture. Check whether your employer offers savings options like a 401(k) and if they’re willing to match it. The money you allocate to your 401(k) will come from your paycheck, and go directly into the savings pot. (Note: remember to read all instructions as our data found the larger the company size, the more that employees feel informed about retirement planning.)

Step 3: Bake in a fixed indexed annuity. The featured ingredient, fixed indexed annuities, or FIAs, can help to balance the flavors of your portfolio while providing guaranteed lifetime income in retirement. Our retirement-readiness research shows that workers are, above all, looking for lifetime income (78 percent). This goal is quickly followed by having stability of income (76 percent) and principal protection (71 percent). However, what might be the most important part of retirement planning is a diversified portfolio.

Step 4: Dig in! Enjoy your Thanksgiving with family and friends and feel confident that your retirement savings strategy will be hearty and satisfying for years to come.

https://fiainsights.org/a-retirement-recipe-for-a-hearty-turkey-day/

Americans are living longer into retirement, but the financial solutions needed to support them have not kept pace with their needs. With a number of bipartisan proposals currently under consideration, the U.S. Congress has the opportunity to take significant steps toward solving these retirement challenges, including ensuring more Americans have access to tools that will guard them against outliving their retirement savings.

With defined contribution retirement accounts, such as 401(k)s and 403(b)s, increasingly taking the place of defined benefit pensions, retirees have become dependent on savings that are often inadequate to fund their retirements. Recent studies put the “retirement income gap,” the difference between the amount of money retirees have saved and what they need to maintain their standard of living in retirement, at $7.7 trillion. In addition, retirement savings are subject to market volatility, interest rate fluctuations, longevity risk and escalating retiree health-care expenses.

One solution to this problem is a product that economists agree to be one of the only providers of guaranteed income outside of Social Security and pensions — annuities. But a key uncertainty has been the appropriate process that fiduciaries should follow when evaluating the financial strength of an insurance company that would provide an annuity. Evaluating the financial strength of any given annuity provider can be a complex process. While the intention of the existing safe harbor is to simplify this process, it lacks the clear guidelines that many plan fiduciaries desire and, for that reason, many plan fiduciaries are reluctant to adopt in-plan annuities, even if they and their plan consultants understand the value annuity products can deliver to their employees.

Without more explicit guidance, it is likely, as the U.S. Government Accountability Office noted, that concerns about legal risks may, “deter many plan sponsors — typically employers that provide 401(k) plans and establish investment and distribution options — from offering lifetime income options.”

This is why we recently testified before the U.S. House of Representatives Subcommittee on Health, Education, Labor and Pensions in support of legislation to amend ERISA. The Retirement Enhancement and Savings Act contains a number of critical reforms to our nation’s retirement system that include establishing clear and objective guidelines that can help plan fiduciaries choose an annuity provider for their plan with the confidence that they have met the guidelines. The proposal does this by allowing the plan fiduciary to rely on representations that an insurer is licensed to offer guaranteed retirement income contracts and has met certain regulatory requirements under state insurance regulations. In essence, it allows fiduciaries to rely on the true experts in evaluating an insurer’s financial strength — the state regulatory bodies.

RESA boasts strong bipartisan support in Congress. We have much work to do secure the financial future of those retiring today and tomorrow, but passage would help ensure that more Americans will have an institutionally priced, in-plan annuity option that will allow them to use some of their retirement savings for its intended purpose — providing a steady stream of retirement income they will not outlive.

https://www.pionline.com/article/20180903/PRINT/180909967/safer-harbor-for-annuities-can-help-fix-retirement-woes

Halloween might get less scary as we age, but there are a lot of frightening aspects of retirement in 2018. In fact, recent data on the state of America’s workforce shows just how underprepared for retirement many Americans are.

While running out of money, drastic lifestyle changes, and the cost of healthcare are among Americans’ greatest retirement fears, here are some figures on where Americans stand:

1. 50%+ of all of Americans report their access to retirement plans and products has flatlined or decreased in the last decade.
2. Roughly 40% of all workers will have to work in their retirement years.
3. More than 40% of pre-retirees have significantly adjusted their lifestyle choice and spending to be able to retire.

With healthcare, taxes, and employer-funded retirement plans all in a state of flux in 2018, this fall is the perfect time to take stock of where you stand in retirement. You can overcome the scariest aspects of retirement planning this Halloween season by checking out these helpful tips:

1. Build a balanced portfolio—One option to mitigate risk in your portfolio is to add a more conservative product like a fixed indexed annuity (FIA). An FIA offers guaranteed lifetime income, helping to ease the stress of having to cover unexpected expenses for longer than anticipated.
2. Make a personal budget—People who plan can feel confident that they will likely end up saving more. Travel and healthcare expenses may increase during retirement so be sure to take that into account too.

As Americans are living longer than ever, it is important they take steps now to plan for the future. Fortunately, there are strategies and products available like fixed indexed annuities that offer guaranteed lifetime income, helping to ease the stress of having to cover unexpected costs for longer than anticipated.  Don’t let your fear prevent you from taking control of your golden years.

https://fiainsights.org/did-you-let-retirement-scare-you-off-this-halloween/

With just a few months left in the year, National Financial Planning Month is a great time to take charge of your retirement saving strategy. Some of the most important things you can do are to make sure you’re creating a diverse portfolio that will protect your principal from market swings and will provide for you for life. There are also common obstacles faced along the way, so make sure to avoid these retirement pitfalls:

1. Lack of Portfolio Diversity. While a 401(k) is a great start to a retirement portfolio, it likely won’t be enough for retirement and will need to be supplemented by another product. For example, a Fixed Indexed Annuity can provide much-needed balance to your portfolio and can offer guaranteed lifetime income.
2. Waiting Too Long to Save. While it’s great that life expectancy is increasing, it’s also becoming more and more difficult to create a nest egg that will provide you with lifetime income. It might seem simple, but it’s worth repeating: the earlier you start saving, the more likely you are to have income that lasts throughout your whole retirement.
3. Not Taking Advantage of Employer-Sponsored “Free Money”. If your company offers a 401(k) or an employer-sponsored plan, even if you don’t plan for it to be your primary retirement saving vehicle, strongly consider contributing at least some percentage of your salary. Think of any match your employer makes as a gift that you waste by not contributing.
4. Underestimating Unexpected Expenses. We like to think of retirement as a free-and-easy time in our lives, but it can be filled with unexpected costs that can derail your financial plan. A recent estimate by Fidelity showed that a 65-year-old couple retiring this year will need an estimated $245,000 to cover medical expenses throughout retirement. Home damage, identity theft or another emergency can compound these costs. That’s why it is so important to make savvy financial decisions and start planning for retirement early, so you’re prepared for the unexpected and are able to enjoy retirement.
5. Relying on Pensions and Social Security Alone. It’s no secret that Americans are questioning the future of Social Security. It’s important to know that Social Security might not be enough to get you through retirement comfortably, and to keep in mind the importance of a balanced portfolio supplemented with other retirement products.
6. Retiring Too Early. While it might be tempting to retire early, remember that you’ll need your money to last as long as you do, so it might be worth waiting a few years to make sure that your financial future is provided for and you can kick back and relax in your golden years.

Protect Your Financial Plan by Avoiding These Retirement Pitfalls

October marks National Financial Planning Month, a time when Americans can look at how they are saving, their retirement goals, and how they can create a tailored approach that works for them. October is the perfect time of the year to plan, with summer winding down and the holidays fast approaching, you can look back on how you’ve done in 2018 and what you could do differently before the year wraps up.

We have compiled a list of quick tips and steps you can take to help ensure you are on the best track to establish a sound financial future and accomplish your retirement goals.

1. The retirement landscape is changing.
   With Americans living longer and spending more time in retirement, many retirees are concerned about outliving their savings. In fact, 56% of Americans admit they are unsure if their retirement savings will last their lifetime.Moreover, the retirement landscape is changing, shifting from employer-provided pensions and 401(k)s to a more do-it-yourself, individual approach.
   -Just 38% of people say they could rely on Social Security alone
   -Only 13% of people say they could rely on pension alone
   -Three in five are very likely to work longer than they’d like to meet their personal retirement goals, and the average worker expects to push back retirement by two years
2. A diversified portfolio is a strong one.
   Diversifying your portfolio means balancing risk and growth!
   
   Designed for the long term, fixed indexed annuities (FIAs) are a great retirement vehicle to help ensure you are not putting all your eggs in one basket. FIAs offer a guaranteed minimum rate of return and tax-deferred growth over time. And because they are insurance products, indexed annuities can offer a guaranteed income for life.With these significant benefits of FIAs, you may be wondering if it is the only type of retirement savings you need. The best long-term savings plan ensures balance by bucketing money in a variety of vehicles like 401(k)s and other qualified retirement plans as well, as each has unique benefits.
3. Consider lifetime income savings options.
   Half of Americans say the number one thing they will miss in retirement is a steady paycheck. They are searching for a product that can help ensure a steady income stream. FIAs are designed to provide guaranteed lifetime income so you can never outlive your savings.These plans moderate risk in your financial plan. Different FIAs have different methods for helping manage this risk, so no matter what happens in the market, you can count on payments throughout your golden years.
   
   
4.  Think of retirement plan risk.
   401(k), 403(b), 457, and other qualified retirement plans are tax-advantaged plans established by the IRS to help Americans save for their retirement years. Many organizations that offer these plans provide their employees with self-service options to access the savings and investment components within these plans.Apart of that, Social Security, as well as FIAs can provide a steady lifetime income stream. FIAs guarantee a fixed rate of return, regardless of market swings; whereas the rate of return for variable annuities depend on the stock, bond, or money market investment. This helps ensure your nest egg is secured and provides for you throughout retirement.
5. Make use of all the resources at your disposal.
   The landscape of retirement is changing and the different paths you can take in financial planning can seem overwhelming. Work with a financial professional to help outline your options and consider the impact of different strategies on your savings and retirement income potential.

   This National Financial Planning Month make use of retirement calculators and other savings tools that help you understand where you are financially and where you need to go to retire. Additionally, think about talking to a financial professionalto see if an FIA may be a retirement savings vehicle to help you meet your retirement goals.

6. https://fiainsights.org/5-things-to-consider-when-building-your-retirement-financial-plan/

Think about your retirement dreams and realities to set a savings goal for the future.

By Rachel Hartman, Contributor

Teachers are among the hardest working professionals and have the unique responsibility to prepare our younger generations for the future. And, as educators across the country are participating in another back-to-school season, it is a good time to highlight how these individuals are looking toward their retirement future.

From teachers to curators and archivists, our data on the reality of retirement readiness in the state of America’s workforce found these individuals employ six percent of workers. In the next eight years, this sector is projected to grow nine percent. And when it comes to retirement planning, a higher portion of these workers indicate they’ll rely not only on a pension, but also their personal savings when in retirement.

In addition to pensions, teachers should be considering other retirement savings vehicles that could help diversify their financial portfolios. Doing so will help them to think outside the classroom and better prepare for the years ahead.

One way this can be done is by considering fixed indexed annuities (FIAs), which address many basic retirement concerns: protection of hard-earned dollars, tax-deferred growth, balance, and lifetime income. To help teachers understand if an FIA is right for them, we have created a useful Q&A for teachers who are planning for retirement:

Q: What is an FIA and why should teachers consider one?

A: An FIA is a contract between you and an insurance company that provides an opportunity to receive a steady, guaranteed lifetime income stream at a future date, like retirement, while protecting the principal from the uncertainty of market volatility.

As a teacher who has depended on regular paychecks for years, an FIA will let you continue to receive regular payments, allowing for a dependable and secure stream of revenue throughout retirement.

Q: Are FIAs a good product for teachers?

A: They can be. But, like any savings vehicle, a retirement saver should conduct thorough research and talk to their financial professional to determine if FIAs are right for them. The beauty of an FIA is its value will never decrease – it only has the potential to grow. Therefore, no matter the unpredictability of the market, you can be confident that your premium payments are secure. What’s more, annuities offer tax-deferred growth, which enhance the long-term value of the annuity. Of course, taxes are paid at the time payments are made to you from the annuity.

Q: Don’t I stand to receive higher returns from other products?

A: It’s certainly possible. There are many products that may result in higher returns – but with a greater reward often goes a greater risk. FIAs should be considered in the context of a wide, diversified portfolio. They stand as a conservative, dependable option that can give retirees confidence as they leave jobs and careers that have long provided regular incomes.

Visit FIAinsights.org for more information and check with your financial professional to determine if an FIA is right for you.

https://fiainsights.org/teachers-retirement-qa-on-fixed-indexed-annuities-this-back-to-school-season/

By Walter Updegrave

People crave guaranteed income in retirement, but they cringe at the mention of the word “annuity.” That disconnect can make it tough to ensure a steady flow of dollars in later life.

One answer: Go with an annuity, but keep it simple.

The appeal of lifetime income is clear in a recent study: Six in 10 people ages 55 and older place a high value on having guaranteed income to supplement what they’ll get from Social Security, according to market researcher Greenwald & Associates and CANNEX, a company which provides annuity-related services to financial institutions. Survey respondents said the benefits of extra assured income include protection against outliving your savings, peace of mind and greater assurance you’ll be able to maintain your lifestyle in retirement.

So why then are so many retirees reluctant to invest their savings in annuities, which are issued by insurance companies and can provide regular income payments for as long as you live? The short answer from the survey respondents: They’re put off by annuities’ complexity and cost.

I would put the results of this study into the “I’m not surprised at all” category. For more than 30 years I’ve been writing about annuities and fielding readers’ questions about them. So I can personally attest that when it comes to annuities most people are (pick a word): confused, flummoxed, misinformed, mystified, baffled, bewildered, totally lost…you get the idea. (To sort through the confusion, read 5 Big Misconceptions About Using Annuities.)

And who can blame them? Some annuities seem almost designed to resist the normal human capacity for understanding, whether it’s variable annuities with their perplexing panoply of fees (mortality and expense, investment management, death benefit and living benefit fees, surrender charges, etc.) or fixed index annuities with their arcane formulas for calculating returns (monthly or annual “point to point,” the averaging method, caps and spreads).

Fortunately, there’s an easy way to get the upside that annuities can offer while sidestepping the complexity and onerous fees. Stick to annuities that eschew expensive bells and whistles and focus instead on what annuities do best: provide reliable income that you can’t outlive. In short, opt for annuities that keep it simple (or at least, given that we are talking about annuities, relatively simple).

There are two types of annuities that fit this description: immediate annuitiesand longevity annuities. With an immediate annuity, you hand over a lump sum to an insurance company in return for monthly payments that will begin immediately (hence the name) and that will continue the rest of your life, no matter how long that may be. Today, for example, a 65-year-0ld man putting $100,000 into an immediate annuity would receive about $560 a month for life. A 65-year-old woman would get about $530 a month, while a 65-year-0ld man-and-woman couple investing $100,000 could count on a monthly payment of about $470 as long as either one is alive.

A longevity annuity works on the same principle except that instead of starting immediately, the payments begin at some point in the future, say, 10 to 20 years down the road. So, for example, a 65-year-old man who invests $50,000 in a longevity annuity that will begin making payments in 20 years would receive just under $2,000 a month for life starting at age 85. A woman and a man-and-woman couple would receive about $1,600 and $1,125, respectively.

A longevity annuity allows you to feel more secure about spending from your nest egg early in retirement: You know that even if your savings run low you’ll have those longevity annuity payments kicking in later on.

Easy Comparisons

With both these types of annuities, you know what you’re giving up, and you know what you’re getting in return. The fact that you are simply buying a fixed monthly payment makes it easy to compare one insurance company’s annuity against another’s (although you do have to allow for the fact that payments from insurers with higher financial strength ratings from companies like Standard & Poor’s and A.M. Best will generally be lower than those with high ratings). You can compare quotes from different firms and check out their ratings by going to an online annuity brokerage like ImmediateAnnuities.com.

Of course, like any investment, immediate and longevity annuities have drawbacks. If you end up dying sooner than you expect, you’ll have shelled out a large sum for a relatively small number of payments, or perhaps no payments at all in the case of a longevity annuity if you die before the payments begin. That possibility galls many potential buyers. It was the No. 3 objection raised by respondents to the recent survey on annuities.

Clearly, buying an immediate or longevity annuity doesn’t make much sense if you’re pretty certain you’ll die early in retirement. (If you’re married or have a partner, however, you’ll also want to take both of your potential lifespans into account.) And an annuity is superfluous if your Social Security and any pension will cover all or most of your essential living expenses, or if your nest egg is so large that your chances of outliving your savings are minuscule. I’m sure Bill Gates, with his estimated net worth of $86 billion, will be able to manage just fine in retirement without an annuity.

Another downside is that once you give up your money in return for lifetime annuity payments, you no longer have access to it. So you wouldn’t want to put all, or probably even most, of your savings into such annuities.

But if you decide you need more guaranteed income or you just feel more secure knowing you’ll have more assured income you can count on even if the financial markets experience a severe setback—don’t be put off by the complexity and high cost of certain annuities. An immediate or longevity annuity can be an efficient and cost-effective way to get you the lifetime income you seek.

This week was a full celebration of America’s workforce!

Labor Day kicked off the festivities on Monday, September 3, recognizing the social and economic accomplishments of American workers. At the same time, National Payroll Week(NPW), September 3 – 7, celebrated America’s employees and the payroll professionals who pay them. To top off the festivities, NPW’s Money Matters National Education Day(MMNED) on Thursday, September 6 focused on promoting financial literacy by teaching paycheck fundamentals to young adults. With our data showing almost one-fifth of all Americans nearing retirement are at the low end of the retirement spectrum, improving financial literacy early on is key to helping America’s workforce feel ready for their golden years.

Even with all the celebrations for America’s workforce, we must remember it is our job to help ensure they are ready for their next big thing: retirement. In fact, NPW’s slogan was, “America Works Because We’re Working for America.”

To continuously serve American workers, whether their retirement is 20 years away or two, it’s good to provide them with the resources they need, so they are not leaving their golden years to chance. Retirement could last decades, let’s help them research ways to grow and protect their nest egg for the long run.

More than one-third of workers who are unprepared for retirement say they don’t have access to traditional retirement plans or products. However, for these individuals, and those seeking more diversity, the impetus starts with oneself.

Here are three quick and easy ways for workers to start taking control of their retirement destinies:

1. Connect with a financial professional, like an insurance agent, who can provide qualified advice.
2. Utilize financial resources, such as online calculators and budgeting tools, to estimate retirement living expenses.
3. Research all available retirement savings options as a step to diversifying portfolios; this may mean exploring fixed indexed annuities (FIAs), which provide guaranteed income, principal protection from market volatility, and interest rate stability in retirement.

So, with that let’s cheers to America’s workforce!

https://fiainsights.org/celebrate-americas-workforce-by-helping-them-take-an-active-role-in-their-retirement/

As a retirement saver, we know the tax reform debate of 2017 reawakened the need for you to examine and evaluate your retirement savings plans and educate yourself on all available options for planning. Our educational videos on retirement planning and fixed indexed annuities (FIAs) is great place to start.

Examining Your Retirement Preparedness Plans

We suggest examining your retirement preparedness plans to ensure you are saving enough now. Financial certainty can be improved if you utilize financial resources, such as the Indexed Annuity Leadership Council’s (IALC) retirement calculators, to estimate your retirement living expenses and determine how much Social Security you’ll receive each month.

Diversifying portfolios and adding an array of options will also help maximize potential gains and minimize risks. Not putting all your eggs in one basket is key for successful planning.

One option to consider adding to your financial portfolio is a fixed indexed annuity (FIA), which can provide balance to financial plans and offer a steady stream of income in retirement. FIAs also offer tax-deferred growth, meaning taxes are not owed until a withdrawal is made. Complete our Retirement Planning Worksheet to see if an FIA is right for you.

Finally, become more educated when it comes to retirement planning, especially as one in five Americans have absolutely nothing saved for their golden years. Enhancing your retirement confidence can include reading up on tips to boost your savings or testing your knowledge with quizzes like our “Master of Retirement” game.

Read on to learn more about the FIA facts and the changing face of retirement.

https://fiainsights.org/for-retirement-savers/

Indexed Annuity Leadership Council

Every August 21 we honor our seniors and recognize their achievements to society.

This tradition began in 1988 when former President Ronald Reagan declared August 21 to be National Senior Citizens Day. Prior to this declaration, many observed August 14 as National Senior Citizens Day when former President Franklin D. Roosevelt signed the Social Security Act in 1935.

Social Security Today

With Social Security just celebrating its 83^rd birthday on August 14, many Americans are wondering if it will reach age 100 in 2035. As it currently stands, the Social Security trust fund is in deficit, and its full benefits will only last until 2034.

Americans’ reliance on Social Security suggests many will be affected if the program cannot pay out its full benefits. According to our recent data on the state of America’s workforce, Social Security still tops retirement income sources, with 78 percent of workers expecting to rely on it.

Tips to Shape Tomorrow’s Retirement Today

This National Senior Citizens Day, we encourage you to show your appreciation for the elderly person in your life by sharing these retirement savings tips, which can be executed, even as we face uncertainty around the future of Social Security.

1. Connect with a financial professional.
   A financial professional, like an insurance agent, who can provide qualified advice, is a great resource to have both in preparation and during retirement. Get a list of questions to ask here.
2. Prioritize lifetime income.
   Our retirement-readiness data found nearly 80 percent of America’s workforce is, above all, looking for lifetime income. Encourage the senior citizens in your life to look for retirement saving options that can provide guaranteed lifetime income, like fixed indexed annuities (FIAs).
3. Research all available savings options as a step to diversifying portfolios.
   While there is no right answer – or guaranteed sure thing – having a balanced financial plan is a proven strategy for income growth and wealth protection. For those currently relying on Social Security to create a stream of retirement income, there are other retirement savings options to consider as well.
4. 1. Utilize financial resources.
      There are many retirement tools out there for your senior citizens. From online retirement calculators to retirement planning materials, help them make the small adjustments necessary for their retirement to truly be golden.

   Celebrate this National Senior Citizens Day with us by sharing what you’re doing to help your senior citizen become more financially free. Make sure to tag us and use #SeniorCitizensDay!

   https://fiainsights.org/celebrating-senior-citizens-today-and-every-day/

With pennies in your back pocket and dollars in the couch, money may seem like it’s virtually everywhere. But, do you know when this phenomenon first began? In 1786, 232 years ago today, Congress established the U.S. monetary system. However, the first U.S. dollar was not printed until 1862.

When the dollar was born, many Americans found themselves trying to grapple with this new form of currency. Now, it seems they are searching for the best ways to track their money and spend less wherever possible. Still, some are financially unprepared for life’s milestones: having a wedding, buying a first home, or sending a child to college. Particularly, when it comes to financial readiness, Americans are considerably unprepared to enter their golden years.

In fact, our recent data suggests almost one-fifth of all Americans approaching retirement are at the low end of the retirement readiness spectrum, having saved 20 percent or less of the money they will need for their golden years. This finding is particularly shocking when coupled with our data that revealed nearly 80 percent of America’s workforce is, above all, looking for lifetime income.

So how do Americans achieve a guaranteed lifetime income stream and prepare themselves to retire smoothly? Today, on National Dollar Day, when the U.S. monetary system was born, we share with you three ways:

1. Consider a Fixed Indexed Annuity (FIA)
   

   Fixed indexed annuities address many basic retirement concerns: protection of hard-earned dollars, tax-deferred growth, balance, and lifetime income. With most Americans seeking a guaranteed lifetime income stream, they can take comfort in the fact that FIAs are designed with this in mind, so you can never outlive your earnings.2.

2. Create a Balanced Portfolio
   

   For many Americans, retirement includes a nice balance between stability, favorite pastimes, and new adventures. But it can also mean balance in your financial life. Diversifying your retirement portfolio is important for balancing risk and growth. By adding an FIA to your financial portfolio, which may already include 401(k) and 403(b) plans, IRAs, CDs, and mutual funds, you can achieve the balance you crave.

3. Save, Save, Save
   

   With National Dollar Day upon us and retirement readiness scores at the low-end of the spectrum, the necessity of saving a dollar is more evident than ever. While Americans can observe National Dollar Day by either spending or saving a dollar, here at the Indexed Annuity Leadership Council, we encourage you to celebrate by starting or continuing to save for retirement. Consider using a retirement planning worksheet or retirement calculator to help you prepare to enter your golden years stress-free.

   https://fiainsights.org/three-ways-to-celebrate-national-dollar-day-while-preparing-for-your-golden-years/

Ensure you have the financial security to be in control of your retirement.

Before determining if an FIA is right for your portfolio, make sure you understand the specific product features and if the benefits ladder into your goals.

The Algarve region provides all that a continental lifestyle has to offer, from medieval towns and fishing villages to open-air markets and local wine.

Retirement might not live up to your expectations.

Annuities can serve many useful purposes.

If you are in a saving-money stage of life, a deferred annuity can…

• Help you meet your retirement income goals. Employer-sponsored plans such as a 401(k), 403(b) or Keogh are an important part of planning for retirement. However, contributions to these plans and to IRAs are limited, and they might not add up to enough for the retirement income you need, especially if you started saving for retirement late or had contributions interrupted—perhaps due to job changes and/or family responsibilities. Moreover, your social security and defined-benefit pension (if you have one) may provide less than you need to retire. Remember that the purchasing power of defined-benefit pension income is eroded by inflation.
• Help you diversify your investment portfolio. Investment experts routinely advise that, to get the best return for a given level of risk, you should diversify your investments among a number of asset classes. Fixed annuities, in particular, offer a unique asset class—an investment that is guaranteed not to decrease and that will actually increase at a specified interest rate (and, often, potentially more). The guarantees are supported by the claims-paying ability of the insurer.
• Help you manage your investment portfolio. Investment experts routinely advise that, whenever your investments in various asset classes get too far from the percentage allocations you prefer, you “rebalance” to the original formulation, by shifting funds from the classes that have grown faster to the ones that have grown more slowly. If you do this with mutual funds, you pay capital gains taxes; if you do it in a variable annuity, you don’t pay capital gains taxes. When you eventually withdraw money from the annuity (which could be many years after the rebalancing), you pay tax then at the ordinary income rate.

If you are in a need-income stage of life, an immediate annuity can…

• Help protect you against outliving your assets. Social security pays retirement income for as long as you live, as do defined-benefit pension plans. But the only other source of income available that continues indefinitely is an immediate annuity.
• Help protect your assets from creditors. Generally the most that creditors can access is the payments from an immediate annuity as they’re made, since the money you gave the insurance company now belongs to the company. Some state statutes and court decisions also protect some or all of the payments from those annuities.

You’re unlikely to reach retirement age without somebody asking you about annuities. They want to know whether you considered buying one, and if they work for an insurance agency, they’re likely to try to sell you on the benefits of a lifetime income that annuities can provide.

So, what exactly are annuities? Annuities are an insurance policies that behave like investments.

Annuities offer a hedge against something bad happening to your money, like a huge loss in a stock market collapse. Instead of personally managing your money and assuming risks inherent in stocks and mutual funds, you buy an annuity that guarantees a steady monthly income for decades or even a lifetime.

Annuities are contracts between investors and insurers designed to meet long-term retirement goals for investors. Money can either be invested in a lump sum or through a series of payments. In exchange for the investment, the insurer agrees to make periodic payments to the investor beginning at a specified date.

Just like a life insurance policy, which guarantees a lump-sum payment to your heirs, an annuity is a contract with an insurance company that pays you, slowly in most cases, while you’re alive, and often provides a payment to a beneficiary when you die. Annuities come with large initial costs. Many purchasers put a substantial part of their retirement savings into an annuity, giving them comfort that no matter what happens, they’ll always have an income. In addition, the amount you invest grows tax deferred until it is withdrawn.

Types of Annuities

Retirement annuities, properly called deferred annuities, come in three varieties, fixed, indexed and variable. All are tax deferred and will pay your beneficiary a specified minimum amount when you die. Periodic payments are made to you for a fixed period or a lifetime, and payments can continue after your death to your spouse.

Variations of Annuities:

• Fixed Annuities. Returns are based on a fixed interest rate that you agree to when you purchase the annuity. The insurance company will also make regular payments of a certain amount on each dollar your invested.
• Indexed Annuities. These base your payouts on the performance of a financial index like the S&P 500 with the stipulation that you will never receive less than a minimum payment amount each month. If the index performs strongly, your return could be greater than the investment, but if it’s weak, you will never receive less than the specified amount.
• Variable Annuities. These use investments such as mutual funds to determine your return. The rate of return on your investment, and the amount of periodic payments you receive, depends on the performance of the funds you choose. Variable annuities typically pay a death benefit to someone you designate. That person can receive all the money remaining in the account or an agreed upon guaranteed minimum.

Annuities come with two payout plans. Immediate annuities begin paying immediately after you purchase them. These products are often sold to retirees who want to convert savings into guaranteed income streams. The other variety is deferred-income. This model allows you to buy an annuity now to receive payouts in the future. If you are in your 50s and don’t envision needed annuity income until you’re 70, this model lets you build value before payouts begin.

You should also remember that unlike savings in government regulated banks, annuities are insurance products that aren’t insured. If you are uncertain about the condition of the company issuing the annuity, you probably ought to rethink making the investment since a corporate failure could eat your retirement savings.

History of Annuities

The concept of annuities dates to ancient Rome, but the first record of annuities in America comes from the Colonial period. In 1759, a company formed to provide a secure retirement for aging Presbyterian ministers and their families. In 1812, the Pennsylvania Company for Insurance on Lives and Granting Annuities received a charter to sell annuities to the public.

The current era of annuities began in 1952 when the educators’ retirement fund, TIAA-CREF, first offered a group variable deferred annuity. Annuities today are mostly used to provide for an individual’s retirement, usually on a tax-deferred basis. Americans bought more than $117 billion in annuities in 2016, according to LIMRA Secure Retirement Institute, and the nation held nearly $2.3 trillion worth of polices.

Structured Settlements and Annuities

Structured settlements are linked to annuities because they’re considered an effective way to deliver money to people who need it but also need the discipline of a monthly or yearly payout. Congress in 1982 passed the Periodic Payment Settlement Tax Act, which established structured settlements to provide long-term financial security to accident victims and their families.

The idea was to replace lump-sum payments awarded to personal injury claimants with periodic payments. The government’s aim was to decrease the number of personal injury award recipients who went through their funds too quickly and were subsequently forced to rely on public assistance. In addition to personal-injury claimants, structured settlements are frequently set up for those who win big liability and damage judgments, for lottery winners and for lawyers and law firms who are owed large sums in fees.

Because annuities can be designed to offer timed payouts, guarantees on principal, as well as investment gains, and were already being offered by insurance companies, they quickly became the preferred vehicle to implement structured settlements. To encourage their use, the new law made any interest or capital gains earned on the annuity within a structured settlement tax free.

Pros and Cons of Annuities

The primary reason to own an annuity is security. In addition to ensuring a continuing stream of income during one’s retirement, many annuities are guaranteed for a minimum rate of return, meaning that not only can their principal be protected against loss; their earnings can be, as well. In some cases, by annuitizing the contract, the owner of an annuity can even receive a life-long stream of income, far more than his or her original investment.

Annuities also offer predictability. Fixed annuities – ones tied to an unwavering interest rate – are especially attractive to investors who want to know how much money they will have years, or even decades into the future. They generally offer rates superior to money market accounts or certificates of deposit (CDs), and come with similar built-in protections and guarantees.

Conversely, variable annuities – ones tied to rising and falling rates – offer the possibility of returns equal to those achieved via stocks or mutual funds, but with greater flexibility, more protections against loss, and certain tax advantages.

Other things to consider: Annuities come with fees, often high ones. The broker who sells you an annuity usually receives a commission, and the company that manages the annuity charges an annual maintenance fee. If the annuity is invested in mutual funds, the funds’ fees become part of the cost.

Since annuities are insurance products, their structure reflects the risk the insurer assumes. For instance, the value of a variable annuity invested in mutual funds varies with the value of the funds, which can go down. If the annuity guarantees a minimum periodic payout, the annuity costs will reflect the risk the insurer takes, and that risk is a premium built into the cost of the annuity. Some annuities also lock in your gains after a certain take, which also adds to the risk the issuer incurs. Again, that risk means extra fees built into the annuity.

The biggest con for annuities is that you must be 59 and a half to with draw the gains from an annuity and not have to take a 10% early withdrawal penalty. There also will be a surrender charge if you try to withdraw early. The charge goes own over time, but if you need the money now, you will pay a penalty.

Another negative for owning an annuity is that many of them charge higher annual fees, especially on variable annuities than those charged on managed mutual funds or stocks. Also, the current interest rates are so low that inflation could easily go up faster than the return on interest you would receive with an annuity.

There are negative tax implications associated with annuities. Gains on annuities are taxed as ordinary income, meaning you could pay twice as much in taxes on it as you would from the capital gains on stocks or mutual fund investments. Another tax penalty comes if you pass along annuity benefits to your survivors after your death. They will have to pay taxes on it as ordinary income.

Questions You Should Ask

If you’re considering an annuity to cover retirement costs, ask yourself questions. Remember there are other ways to pay for retirement, including withdrawals from independent retirement accounts and 401(k) plans. You should consider the alternatives and get solid advice, perhaps from a certified financial planner.

If you are leaning toward an annuity, consider:

• Are you willing to accept the risk that your value could decrease if you invest in a variable annuity?
• Do you understand all the fees and expenses connected with the annuity?
• Do you plan to keep a variable annuity long enough to avoid surrender charges if you decide you want to redeploy your money?
• Are there elements of a variable annuity, such as long-term care insurance, that might be purchased less expensively elsewhere?
• Have you talked to a tax or financial adviser about the tax consequences of an annuity?

Structured Settlements Using Annuities

To pay the financial obligations owed to an injured party, a defendant – or more usually, his or her casualty insurance carrier – will purchase one or more annuities from a life insurance company, or delegate its periodic payment obligations to a third party, which in turn would purchase a qualified funding asset – either an annuity or a government bond.

About $5.5 billion in structured settlements were issued in 2015, according to LIMRA Secure Retirement Institute.

The payments are then structured, or scheduled. An insurance company agrees to pay the injured individual a predetermined amount of cash for a fixed length of time or for the duration of the life of the claimant, depending on the terms of the settlement agreement.

Structured settlements are governed by both federal and state laws and must be closed under court order. The process is highly regulated by the courts. Some states also require the hiring of an attorney as a precondition to acquiring a structured settlement annuity.

How to Sell a Structured Settlement

Sometimes those who receive structured settlements wish to claim their cash awards sooner than a payment schedule allows. This typically follows a significant change in someone’s life situation. Financial situations can change, and more money than an incremental monthly income is needed: to pay medical bills, to buy a house, to pay off debts, to fund a college education, etc.

In these situations, someone with a structured settlement agreement can negotiate to sell the rights to their future settlement payments. They can sell these rights in whole or in part, although a judge must agree to the terms and the sale before the sale can happen.

Finding a buyer for your future settlement payments could be as easy as visiting review sites online and view the comments by others in your situation.

Prospective buyers should have some or all of these characteristics:

• Offer full explanation of the fees and exactly how much you will receive for the annuity
• A staff of lawyers available to help make the sales process a smooth one
• Helpful customer service representatives able to explain the process and answer any questions
• Offer fair rates and cash advances
• Prepare paperwork and allow time for you to review it before signing
• Allow you to use your own attorney to review contract

Individuals do not negotiate with the owner of the structured settlement (usually an insurance company) but do so with a third party willing to buy all or part of the remaining settlement, known as the funder.  The structured settlement rights holder must provide a legitimate need for the money and calculate the requested payout amount so that the best interests of the seller and any dependents are recognized and upheld.

When selling a structured settlement, it’s important to find a reputable funder, who bids on your structured settlement. Locating a funder is only part of task. To sell your structured settlement you must prove that you have a legitimate need for the settlement money in a lump payment and calculate what that payment might be. In most cases, it requires judicial approval. The need can’t be something frivolous or discretionary. Generally, the desire to buy a new car or a diamond ring won’t win approval, but a cash out agreement might be acceptable to cover an unexpected medical expense, job loss or some other urgent financial demand.

In most cases, structured settlement holders only sell part of their annuity. Typically, the funder will ask for a discount rate of between 6% and 29% of the settlement’s value. There are other costs, including surrender charges of as much as 10%, and if you sell the annuity before you reach the age of 59 ½ you will pay federal tax penalties.

Before selling a structured settlement, policy holders should weigh the financial losses they might incur against the need they have for an immediate payout.

Check on line to learn if the broker has customer complaints, and check that the broker is listed with the Better Business Bureau. Determine that the funder has never defaulted on a settlement purchase, has been in the business at least three years, is registered to do business in all 50 states and is based in the United States. The funder should also have a policy of offering the best price and be prepared to complete the transaction within two months.

Annuities and Structured Settlements

When you think about retirement, what are your goals? For most people, the answer is a nice balance between stability, favorite pastimes, and new adventures. Balance is also important in your financial life: between reward and risk, nest egg preservation, and growth.

No one knows what the future holds. That’s why fixed indexed annuities (FIAs) should be considered by retirement savers looking for peace of mind no matter what happens in the financial markets.

We promise no pop quizzes or grades. Just solid, simple information from “what is an FIA” to “how annuities differ” to “how to tell if this retirement vehicle may be right for you.” Ready, set? Let’s learn.

What is an FIA?

A fixed indexed annuity (FIA) is a contract between you and an insurance company. FIAs offer the opportunity for tax-deferred growth based in part on changes in a market index, plus the option to convert your annuity into a steady, guaranteed, lifetime income stream, all while protecting your hard-earned principal from the uncertainty of market volatility.

When purchasing an FIA, you agree to pay for it in either a single lump sum or multiple payments over time. In return, the insurance company takes the risk of market downturns to protect your annuity value and also promises to make payments from the annuity to you in a single payment or series of payments, over a fixed number of years.

Money in an FIA earns interest based on changes to the index. Annual interest is calculated using a unique formula based on changes in the performance of stocks (S&P, Dow Jones, NASDAQ), bonds (Capital Markets Bond Index), or commodities (CBUE). The index is used as an external benchmark – you do not actually invest your funds in it.

How an FIA Works

Generally, fixed indexed annuities (FIAs) have an interest rate floor, which is the minimum interest that will be credited each period – typically 0%, a participation rate, which is the percent of an index that will be used to calculate interest crediting, and/ or a cap, which is the maximum interest that will be credited. Together, the interest rate floor, participation rate, and cap determine the amount of interest you earn. Your interest earnings rate will always remain somewhere between the floor and the cap. It will not rise above the cap, even if the index goes higher. Conversely, it will never fall below zero, even if the index declines in value. In fact, the value of your money will never decline due to market loss for as long as it is in the FIA, although it can increase with a rising index.

If you withdraw your money from an FIA before an index terms ends, the annuity may not add all the index-linked interest for that term to your account. Additionally, like many long-term financial products, like CDs or mutual funds, FIAs have a surrender fee for early withdrawal, the terms of which depend on your contract.

Differences Between Annuity Types

There are a few different categories of annuities, each with its own unique set of characteristics. Keep in mind both fixed and variable annuities are types of deferred annuities. Additionally, fixed indexed annuities (FIAs) are a kind of fixed annuity and an indexed variable annuity is a type of variable annuity.

Fixed Indexed Annuities (FIAs)

FIAs are contracts between you and an insurance company. Regardless of market swings, this financial product guarantees a minimum rate of return for a fixed number of years. Interest is earned based in part on changes in a market index, which measures how the market, or part of the market, performs. Other characteristics of FIAs include no risk to your principal, tax-deferred growth, and the ability to create an income stream you can’t outlive. State insurance commissioners serve as the regulatory authority and states are required to have life insurance licenses to sell the product. For FIAs, the insurance company assumes the risk.

Variable Annuities

Variable annuities, sometimes called shield annuities, are contracts that offer a rate of return depending on the stock, bond, or money market investment. In variable annuities, the buyer makes a lump-sum payment or series of payments. In return, the insurer agrees to make periodic payments beginning immediately or at a future date. While returns are not guaranteed, variable annuities offer tax-deferred growth. Purchase payments are directed to a range of financial products, called sub-accounts, which are managed similar to mutual funds, or directly into the separate account of the insurance company that manages the portfolios.

Fixed Annuities

Fixed annuities are contracts in which the insurance company makes fixed dollar payments to the annuitant for the term specified in the contract, usually through the lifetime of the annuitant. Like FIAs, the insurance company guarantees both earnings and principal. Other characteristics include tax-deferred growth. State insurance commissioners serve as the regulatory authority and states are required to have life insurance licenses to sell the product. Once again, the insurance company assumes the risk.

Indexed Variable Annuities (IVAs)

IVAs are contracts that provide the opportunity to grow your assets, with some level of risk that is dependent on the performance of the investments selected. IVAs offer a level of protection with index strategies, performance potential through variable options and/ or index options, income options, and death benefit options. In IVAs, the buyer makes a payment in one or more payments. The consumer assumes the risk.

Fixed Indexed Annuities 101

Although most people know it’s never too early to start planning for retirement, many Americans aren’t truly prepared, and there are many supporting statistics from the Indexed Annuity Leadership Council’s (IALC) data:

1. One in four baby boomers (think: your dad) have less than $5,000 saved for retirement
2. More than 40 percent of America’s workforce reports they are worried about their golden years
3. Nearly 90% of Americans lack confidence in their retirement savings

With Medicare reaching insolvency in 2026, and Social Security in 2034, there is no better time than the present to begin helping those most near and dear to your heart plan for the years ahead. This Father’s Day, we’re sharing three ways to ease your dad’s retirement process and make the most of your family’s time together.

1. Step in and help your dad see his retirement savings vehicles

   Not every employer offers employer-sponsored plans. In fact, our recent data on the state of America’s workforce found workers at small companies (fewer than 50 employees) are two times more likely than employees at larger companies to feel their employer is not helpful at all in retirement planning.

   To diversify options and best prepare for retirement, you should encourage your dad to consider alternative retirement savings options like fixed indexed annuities(FIAs), as they address many basic retirement concerns: protection of hard-earned dollars, tax-deferred growth, balance, and lifetime income. Knowing all the available options will help you both make an informed decision.

2. Encourage your dad to talk to a financial professional

   Saving for retirement can be overwhelming. With all the possibilities out there, it can be hard to know what is the best retirement savings options for you. However, these vehicles don’t seem as confusing when you sit down and discuss them with professionals. Taking the fixed indexed annuity example, to decide if dad should add one to his portfolio, encourage him to consult a financial professional, who is licensed to sell FIAs. Check out 10 questions to ask a financial professional here.

3. Spend more time with dad

   An important part to any retirement is making sure your family members feel valued and loved. It can be easy for someone, who is used to a routine, to lose their sense of purpose when they retire and many retirees can feel disconnected from their busy children. Having a structure or schedule can help your loved ones look forward to things ahead. Here are some easy, cost-effective activities you can do with your dad:

   – Go hiking, fishing, walking, biking, or jogging

   – Watch a movie, make arts and crafts, bake dessert, or cook dinner

   – Go to museums, monuments, parks, or libraries

   – Read a book together

   – Volunteer or take a class together

We hope these tips can help bring you closer to your dad this Father’s Day, as you begin to plan for his retirement. Remember, you have a special role to help your dad transition into his golden years.

https://fiainsights.org/3-ways-to-prepare-your-dad-for-retirement-this-fathers-day/

Here are four challenges to jump on right now to make sure your retirement is a happy one.

I know you’re ready. You’re so close to retirement, you can taste the cool beverages on the beach and feel the sand between your toes.

Unfortunately, at the rate you’re going, dear Baby Boomer, your retirement might not be exactly as you dreamed it.

Maybe it’s because you never could quite imagine getting this old, or because they keep changing the rules (or threatening to) as you go along, but your retirement is going to be a bumpy ride if you don’t exercise a little tough love.

Here are four issues you’ll need to tighten up on in order to enjoy that sunny future.

1. Boomerang kids.

According to a study by Federal Reserve Board economists, the number of young adults (ages 18 to 31) who lived with their parents rose 15% between 2005 and 2014 — to a historic high of 36%. And those parents who aren’t housing their adult children are often helping them financially — paying student loans, co-signing car loans and more.

I’ve talked to people who have taken out money from a 401(k) to help their kids — who are in their 30s and 40s — buy a home. That’s a huge blunder, for a couple of reasons.

Besides creating a potential dependency problem that could dog your kids for life, all that help is drawing from resources you’ll need when you retire. Parents who are 65 years or older with financially independent kids are more than twice as likely to be retired as those who financially support their adult children, according to a 2015 study by retirement market research firm Hearts & Wallets. If you can’t bring yourself to kick them out, at least insist that your kids contribute something toward room and board. And stop paying for their cellphones and car insurance!

2. Longevity.

You’re likely to live longer than you think, which, of course, is a blessing — but one you’ll have to plan for. A man who is 55 years old now can expect to live to 83 or 84; a woman the same age will likely live to 87. When the Social Security program was initiated in 1935, the average life expectancy was 61.

Still, a lot of people just can’t imagine decades of retirement — or what it will mean when it comes to their income plans. It used to be that the standard withdrawal strategy was to take 4% from the initial value of your savings — and if you did that annually with a balanced portfolio (which used to mean 50% in stocks and 50% in bonds), you’d be able to avoid running out of money.

That’s no longer the case — not in our low-yield world. Mutual-fund managers T. Rowe Price and the Vanguard Group as well as online brokerage Charles Schwab have issued reappraisals of the guideline, to now lower than 4%. And many advisers are reassessing withdrawal percentages annually based on market fluctuations. So — yay! — you’ll probably live to see more grandkids and grand sights than you ever thought, but it will require a much bigger nest egg than the one you’ve been building.

3. Health care costs.

Just because you’re going to live longer doesn’t mean you’ll stay healthy all that time. The average 65-year-old couple retiring in 2016 will need $260,000 to cover their medical expenses throughout retirement, a recent Fidelity report concluded. That’s not all the bad news. What makes it worse is that, according to a 2016 PWC survey, roughly half of all Baby boomers Boomers have a nest egg of $100,000 or less to pay for everything.

If you’re counting on Medicare to cover your costs, don’t. You’ll need a supplement or advantage plan to help with some of your expenses, and if you need to recover from an illness or an injury, your Medicare coverage will stop as soon as you are better, which is not the problem. What can be a significant issue is if the benefit allotment runs out. The Genworth 2016 Cost of Care Study found that the national median cost of long-term care rose across all settings, except adult day care — and the sharpest increase was for services provided in the home.

How would you cover such expenses? Options include long-term care insurance, annuities or a cash-value life insurance policy with a long-term care rider. (Pointing to how healthy your Great-Aunt Edna was at 92 doesn’t count as a plan.)

4. Income streams.

Financial professionals used to talk about the three-legged stool of retirement income: Social Security, employee pensions and personal savings. But that’s a pretty wobbly stool these days.

You’ll need a plan that’s built to handle the possibilities that inflation and taxes will rise. Protect yourself by moving your retirement savings out of any investments that carry a lot of risk. And don’t count on Social Security as your main source of income — it’s projected that the trust won’t be able to fully fund benefits starting in 2034.

To give you a little perspective: The youngest Baby Boomers, born in 1964, will be 70 that year.

The road to retirement is littered with obstacles — some of which you can control. Put your daydreams on pause and pick up the phone: If you haven’t already, find a trusted adviser to help you clear the way.

This May we are celebrating Older Americans Month and the 2018 theme of Engage at Every Age teaches us that age is not a factor when it comes to taking part in activities to enrich one’s emotional, mental, and physical well-being. One activity that is key for promoting mental and physical wellness is saving and planning ahead for retirement.

New data from our America’s Workforce study found that the greatest barrier to retirement savings for Americans is not saving earlier (40 percent). In turn working more and working longer has becomes today’s reality for America’s workforce, with 3 in 5 very likely to work longer than they’d like to meet their personal retirement goals. Additionally, on average, Americans expect to push back their retirement by 2 years. 

With these stats in mind, it is important to remember Americans have the power to shape tomorrow’s retirement at any age. No matter if they are just starting out in their career or are planning to retire in a couple months, there are things all Americans can control when it comes to saving for retirement, and simple mistake they can and should avoid.

Here are 3 simple mistakes Americans make when saving for retirement and how to avoid them:

1. Underestimating medical expenses.

When you’re healthy, it’s difficult to imagine spending a lot of money on medical expenses. However, as you get older, it’s nearly inevitable that your medical expenses will grow and while your money will no longer be flowing in through a consistent salary, it will be important to set aside money for healthcare expenses. In fact, the average 65-year-old couple will pay $240,000—that’s right $240,000!—in out-of-pocket costs for healthcare during retirement, according to Fidelity Investments – and that number does not include potential long-term care costs. It’s important to consider retirement products that can ensure lifetime income so you can be prepared for unexpected medical costs.

2. Waiting too long to start. 

Right now, the number of Americans who have student loan debt in some form has risen to more than 40 million, according to CNN. And while it’s easy to convince yourself you can put off saving for retirement until your debt is paid off, experts note that the most important asset you have when saving for retirement is time. Every six years you wait to get started doubles the required monthly savings you’ll need to reach the same level of retirement income – so it’s important to start saving early, even if you can’t save as much as you’d like. Every little bit counts.

3. Lack of diversity.

In order to ensure that your golden years can be spent enjoying traveling and time with friends and family, it’s important to diversify your portfolio and not to rely solely on one form of retirement income, such as a 401(k) or Social Security. In fact, The U.S. Department of Labor notes that diversity is important when it comes to retirement savings because it can actually help to reduce risk and improve return. Assessing your investment mix at different stages in your life is key – when you are young, a higher-risk investment strategy may be more effective, whereas the closer you are to retirement, the more important a low-risk portfolio may be, with more conservative products such as Fixed Indexed Annuities (FIAs).

After one year of retirement, here’s what you need to do.

Recently, an esteemed group of experts in business and finance, economists and education, convened in Washington, D.C. along with our Executive Director Jim Poolman and editors from The Atlantic for a roundtable dinner to talk about the reality of retirement readiness amid America’s workforce.

Our recently released Retirement-Readiness Scores and accompanying data suggests technological, demographic, and economic shifts are contributing to retirement planning becoming a responsibility every employee may have to shoulder. In turn, the galvanizing question of the evening became:

As working-class Americans prepare for a future of work with less job security and fewer benefits, how can they best prepare for retirement?

Great points were made by all attendees, which included representatives from AARP, Home Care Association of America, Bipartisan Policy Center, National Hispanic Council on Aging (NHCOA), U.S. Chamber of Commerce, and more, on how we can approach the changing face of retirement:

1. Embrace the ‘Do It Yourself’ Retirement Saving and Planning
   The recent shift from employer-sponsored retirement to a “do-it-yourself” endeavor for many was widely discussed by attendees, including Shai Akabas.

   “Moving away from an employer-sponsored system, where the employers are responsible for delivering certain benefits, to more of an employer-facilitated system, is probably the direction we’re heading in, as there are so many workers who are not currently covered by the employer-sponsored system.”  -Shai Akabas, Director of Economic Policy, Bipartisan Policy Center
   

   In turn, we must empower individuals to take on the ‘do it yourself’ method, as further supported by our recent data that found one in eight American workers are not offered any type of retirement plan from their employer.

   Some ways individuals can take action is by using customizable calculators and retirement planning materials to plan ahead, as well as talking to a financial professional. For example, if you are thinking about adding a fixed indexed annuity (FIA) to your portfolio, an insurance agent, who is licensed to sell the product, is a great resource to help you decide what vehicles are right for you.

2. Improve Financial Literacy Early On
   With our data showing almost one-fifth of all Americans nearing retirement are at the low end of the retirement spectrum, attendees across the board agreed improving an individual’s financial literacy is crucial.

   “From AARP’s perspective, when people come to us for education, it’s at 58 or 59, a couple of years before they tap into what is Social Security. It becomes not about what they’re thinking, but rather them trying to catch up for the state of trying to stay warm. They are at the cusp of retirement and that is why they are starting to worry and realize they need to do something about it.”  -Jean C. Setzfand, Vice President, Financial Security, AARP

   In turn, Setzfand and others felt a good first step to becoming financially literate is taking time to know and understand all retirement plans and options available, and to start early on.

   “People are making bad decisions because they are uneducated. I think having programs where they start financial education in high school and having it be state mandated is a good idea…. They [students] are then sharing their experiences with their parents, so not only are the students learning, but so are the parents, which is helping two generations at the same time.”  -Rodney Brooks, Retirement Columnist,U.S. News & World Report

   Education on retirement vehicles is vital, as our data found nearly 80 percent of pre-retirees say lifetime income is their number one retirement need. To meet this need, pre-retirees should be financially aware of their options to help ensure their golden years are what they dream about. One product that not only guarantees lifetime income, but also provides other benefits, such as peace of mind, no matter what happens in the market, is fixed indexed annuities. However, our study showed only two percent own one.

3. Foster a Savings Culture
   With not saving early enough the most common mistake and regret among American workers (40 percent), attendee Angela M. Antonelli explained how we should be thinking about retirement security as a three-pillar stool. This stool would have one pillar for national savings, like Social Security, one for occupational savings, and one for general savings. Antonelli goes on to explain how it is our responsibility as a country to ensure pre-retirees should be putting money away in all three categories.

   “We need to help people build their stool and build it as early on in their life as possible. Once they’ve built that stool, we need to help educate them on how to effectively make sure the pillars remain strong… and we need to make sure that stool is strong enough to last 100 years.”  -Angela M. Antonelli, Executive Director, Center for Retirement Initiatives, Georgetown University

   Fixed indexed annuities are one savings option that could fit into your three-pillar stool, as they ensure your earnings will never fall below zero, as well as provide growth potential.

In all, in the changing face of retirement, this dinner provided great insight into how we can begin to move the needle to change the retirement landscape. The story of lack of retirement readiness in America is widely known, so it is our responsibility to not just report on the problem, but address it. You can start by continuing to explore our website to learn more about fixed indexed annuities and retirement planning.

https://fiainsights.org/the-atlantic-roundtable-dinner-sparks-conversation-on-the-future-of-retirement/

This week the Indexed Annuity Leadership Council (IALC) released The State of America’s Workforce: The Reality of Retirement Readiness study and corresponding white paper, which found retirement readiness is influenced by two key factors: the industry you are in and your company size.

Based on findings from a national survey of more than 2,000 full-time working Americans, across white-, blue and gray-collar industries, we are shedding light on the current state of how American workers are approaching retirement planning and preparedness.

The study shows blue- and gray-collar workers are less prepared for their golden years than their white-collar counterparts. The numbers are bleaker for blue- and gray-collar workers in the Food Preparation and Serving, and Personal Care industries, as well as workers at smaller companies. However, two blue- and gray-collar industries, Engineering and Protective Services, are breaking workforce stereotypes when it comes to retirement readiness – outpacing all white-collar employees.

Key Themes from The State of America’s Workforce Study:

1. Access matters.
   

   Access to employer-sponsored plans correlates directly to retirement readiness. Fifty-nine percent of those prepared for retirement have access to a 401(k) plan, compared with 39 percent of unprepared workers. For the one in eight American workers who are not offered any type of retirement plan from their employer, the retirement income planning is a “do-it-yourself” endeavor. But with the “do-it-yourself” retirement reality comes empowerment. America’s workforce has what it takes to guarantee a retirement that fits their needs, even without access to employer-sponsored plans.

2. Larger companies are better preparing employees for retirement.
   

   The larger the company size, the more employees feel informed about retirement planning and very excited about their golden years. Unfortunately, workers at small companies are two times more likely than employees at larger companies to feel their employer is not helpful at all in retirement planning.

3. Information is key.

   Overall, American workers are satisfied with the amount of information their employer provides about retirement options. But compared to workers who feel very ready for retirement, unprepared workers show disappointment with the retirement information provided by their employers and lower levels of access to employer-sponsored plans.

4. Need for guaranteed, lifetime income.
   

   Our retirement research shows workers are, above all, looking for lifetime income (nearly 80 percent), when asked to identify essential needs for retirement planning More than three-quarters of worker plan to meet this need by relying on Social Security. Given the sustainability concerns of Social Security, it is important to consider adding savings vehicles to your financial portfolio, like fixed indexed annuities (FIAs), that provide guaranteed lifetime income, in addition to principal protection from market declines, and tax-deferred growth. However, currently only two percent of pre-retirees are taking advantage of this option.

Despite gaps in retirement readiness and employer assistance, today’s retirement landscape offers a variety of savings options and planning resources for workers to create their own retirement freedom. Like never before, Americans have the power to take control of their financial planning, which is not only saving for retirement, but also securing retirement income to last the long haul. Financial resources such as online calculators and budgeting tools can help ensure an accurate, customized plan is in place with funds to last a lifetime.

Take a closer look at The State of America’s Workforce study by downloading the corresponding white paper, which provides ideas for getting the American workforce ready for retirement.

https://fiainsights.org/is-your-work-environment-setting-you-up-to-achieve-your-retirement-goals-new-study-tells-all/

Heavy Reliance on Social Security for Income Stream, A Solution Provides Guaranteed Lifetime Income

The story of saving for retirement today has two key factors: the industry you are in and your company size. Newly released retirement-readiness scores show workers in two blue- and gray-collar fields, Engineering and Protective Services, are better prepared for retirement compared to all workers – outpacing even white-collar employees – reports The State of America’s Workforce, a national study commissioned by the Indexed Annuity Leadership Council (IALC).

Yet overall, blue- and gray-collar industries are less prepared for their golden years, with eight of 11 scoring below average. The numbers are especially bleak for workers in the Food Preparation and Personal Care industries. The bottom-ranked industries show a barrier of access to employer-sponsored plans, which traditionally have provided accumulation and lifetime income opportunities.

In fact, more than one-third of workers who are unprepared for retirement say they don’t have access to retirement plans or products, leaving them to create a self-driven plan for saving enough and making it last as long as they do.

“Long-term planning is hard enough when we know all related variables, but retirement planning is riddled with unknowns, whether you have an employer-sponsored plan or not,” notes Kristen Berman, co-founder and principal at Common Cents Lab at Duke University and a collaborator on the study. “One option to introduce certainty into the retirement equation is exploring a savings vehicle that provides a guaranteed lifetime income, like a fixed indexed annuity. This type of annuity leans into our desire for certainty by providing a steady stream of funds, helping Americans solve the complex math problem known as retirement savings.”

The quest for a stable income you can’t outlive is a goal shared by the majority of America’s workforce, with almost 80 percent reporting this as their number one retirement need. Unfortunately, more than three-quarters of workers plan on meeting this need by relying on Social Security.

Given the sustainability concerns of Social Security, it is important to consider additional savings vehicles, like fixed indexed annuities, which also provides guaranteed lifetime income, in addition to principal protection from market declines and tax-deferred growth. However, currently only two percent of pre-retirees are taking advantage of this option.

“A diversified portfolio is a proven strategy for income growth and wealth protection,” said Jim Poolman, Executive Director of the IALC. “Fixed indexed annuities can be combined with Social Security, independent accounts, and other employer-sponsored options, if available, to help ensure a balanced financial plan, while also being the one product in the mix to assure a lifetime income stream that keeps going.”

Financial planning is not only saving for retirement, it is also about securing retirement income to last the long haul. Financial resources such as online calculators and budgeting tools can help ensure an accurate, customized plan is in place to ensure funds will last a lifetime. For workers getting close to retirement age, financial retirement goals shift from accumulation of wealth to principal protection and longevity of dollars.

“If you have qualified dollars, from vehicles like 401(k)s or IRAs, and are looking at next steps for when you retire, many wonder how to take what they have accumulated and make it last,” comments Poolman. “A fixed indexed annuity provides principal protection from market fluctuations and guarantees a reliable income check that is predictable and will not stop for the duration of your retirement.”

About The State of America’s Workforce
All data is based on a large-scale, quantitative survey of 2,103 U.S. full-time working Americans conducted during March 2018 by Research Now, a global market research company with more than 11 million panelists. White-, blue- and gray-collar workers, as classified by the Bureau of Labor Statistics (BLS), were included in the survey population. The study’s retirement-readiness scores are calculated based on the percent of the money needed for retirement that respondents reported already saved.

About the Indexed Annuity Leadership Council
The Indexed Annuity Leadership Council (IALC) brings together a consortium of life insurance companies with a commitment to providing consumers, the media, regulators and industry professionals factual information about the use of fixed indexed annuities. Namely, that these products provide a source of guaranteed income, principal protection from market declines, and interest rate stability in retirement as well as balance to any long-term financial plan.

April is National Financial Literacy Month and a perfect time to increase your financial literacy, while establishing and maintaining healthy money and finance habits.

One way you can become financially savvy is by getting advice from financial professionals. According to survey results from the Indexed Annuity Leadership Council, when seeking information or advice about finances and money, 42 percent of Americans turn to friends or family members, 41 percent rely on search engines, like Google, and only 39 percent ask a financial professional.

However, talking to a financial professional with the right knowledge can help ensure you are left with more answers than questions to help you achieve your long-term financial goals. To get the most out of your meeting and ensure a fiscally sound future, make sure to ask your financial professional these three questions.

1.How much of my income should I put toward my retirement savings? While the percentage of income that goes toward retirement savings varies from person to person, no matter how much income you make, it is important you are contributing something toward your retirement. Talk to your financial professional about your goals to assess an amount that works for you.

2. Is my portfolio diversified? Investing in your company’s 401(k) can be a great choice if your employer offers this type of retirement plan, but it is not the only option. Balancing your portfolio with options like fixed indexed annuities (FIAs) will help address many basic retirement concerns: protection of hard-earned dollars, tax-deferred growth, balance, and lifetime income.

3. Am I ready for retirement? According to a report from the Indexed Annuity Leadership Council, one in three Americans confess to stopping their retirement savings at least once. Ask your financial professional to examine your financial situation and evaluate if you are on track to meet your retirement goals. If not, see what adjustments you can make in your savings strategy to help foster financial security.

https://fiainsights.org/top-3-things-to-ask-your-financial-professional-during-financial-literacy-month/

Now that the Powerball winner has come forward to claim her prize of $758 million (before taxes), you can’t turn on the television or radio without hearing the word “annuity.” The winner of the lottery had a very important choice to make: to take an after-tax lump sum or pay the taxes and receive income for life. This got me thinking about the number of people who don’t understand exactly what an annuity is and how it can be beneficial when used in the following situations:

1. The stock market makes you nervous. We are having the third-longest stock market upswing in U.S. history. The S&P 500 has nearly tripled since its low point on March 9, 2009. In fact, it is up 194% since then. In January 2016, we saw the bull-market run slow down quite a bit. Now we have renewed concerns over whether President Trump can move his proposed tax cuts forward and the mounting threat of potential issues with North Korea, to name but a couple. Equity-based investments fluctuate in value depending on how the equity markets are performing. When the market is going up, we are happy. But when it heads south, it’s painful to watch our account values go down. 2008 and 2009 are painful reminders of what can happen when the market performs poorly.

A safe alternative to equity markets is annuities. An annuity can protect your principal value, ensuring your principal remains intact, even in a down market. Many who are nearing retirement do not want to risk their principal at such a crucial stage in the game. Equity markets are an unsettling place to be in when nearing retirement, especially with a market that seems like it will soon correct itself. Many retirees have worked a lifetime to save for retirement, and a loss of 10-30% of their funds would be a catastrophic blow for their future. Retirement would look a lot different if this happened. One could be forced to work longer than anticipated, or retirement funds would have to work that much harder to earn the interest needed to provide you with the income needed to retire, therefore requiring you to make riskier investments at a time when you should be looking at conservative positions. So if the markets make you nervous as you are approaching retirement, an annuity is something to consider for a portion of your assets. 

2. You seek predictable returns and safety. Fixed annuities can offer guaranteed minimum returns. Some annuities will also allow you to participate in an index, such as the S&P 500. Your return is tied to the performance of a particular index and offers a participation rate or cap on return. Simply put, in the following example, if the index goes up 10%, you would earn 7.5%. This is a 75% participation rate. You participate in 75% of the gain. The tradeoff of the cap is that, in the event the index goes down, you might earn nothing, but you don’t lose anything, either. You are taking part in a portion of the upside, but not the downside. Some annuities offer a minimum return and then stack on the returns of the index to that minimum, giving you an even higher return. In short, if you still want to participate in market-type returns without risking your principal, a fixed index annuity may be suitable for a portion of your assets.

3. You want guaranteed income for life. Along with such great features as safety of principal, market-like returns, and predictable earnings, many fixed annuities also offer a feature called an income rider. This rider can be added for a cost of approximately .85% to 1%, depending on the company, and is designed to give you a lifetime income stream. If you’re like most Americans, you don’t have a pension, like firefighters, police officers, teachers, and town/state employees do, but you’re looking for a way to generate that same kind of income. The days of the three-legged stool no longer exist. Years ago, many retirees could count on Social Security, a pension from their employer, and their own savings to deliver the necessary income during retirement years. Today, most employers only offer 401(k)s rather than pension plans. These income riders can provide a guaranteed income for the life of the individual and their spouse if they choose the joint income payment. The income rider will act as your own personal pension. It will roll up at a rate of 4–6% each year, depending on the companies used, and, in some cases, those are minimums. The income rider is a value that will grow over time and is predictable and guaranteed. Each year that you choose not to turn on the rider, the lifetime income amount will increase in value. Therefore, your guaranteed income will increase each year (very similar to Social Security). This takes the guesswork out of how much income you will be able to take from your savings and investments and how much you can count on in any particular year. In traditional investments, it is difficult to gauge how much income you can take from your savings each year because equity investments fluctuate in value. When the market goes down, and the value of your portfolio declines with it, you then have to withdraw funds to live, which compounds the problem. Carving out a portion of money to provide guaranteed lifetime income is something to consider when looking at an annuity.

4. Nursing home and long-term care expenses concern you. The high cost of nursing home and long-term care insurance is one of the top three concerns of every retiree we see. A nursing home in the greater Boston area can cost up to $14,000 a month. Long-term care insurance is costly and can be upwards of $5,000–$6,000 per year in premiums. Some individuals who can afford it and want long-term care insurance are uninsurable due to a preexisting illness or sickness. How do they solve this issue? Many people are forced to roll the dice and cross their fingers that they never need nursing or home care. In this case, if an extended stay is necessary, it will quickly wipe out a lifetime’s worth of savings. Many annuity companies that offer the lifetime income rider also include an additional enhanced benefit that provides for more income provided an individual is ill and unable to perform two out of the six activities of daily living. For example, if someone is receiving $30,000 per year from their income rider and meets the qualifications for the enhanced benefit, their income would increase to $45,000. This additional income could help with at-home care or provide more income that could be used towards a nursing home bill. This feature is another reason why an annuity is something to consider for retirement planning. You never know what can happen.

If you identify with these four concerns, do yourself a favor and contact a financial professional who can help you on the road to worry-free retirement!

Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Consult your financial professional before making any investment decision.

Annuity guarantees rely on the financial strength and claims-paying ability of the issuing insurer. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products. They do not refer, in any way, to securities or investment advisory products. Fixed insurance and annuity product guarantees are subject to the claims‐paying ability of the issuing company and are not offered by us.

Four Reasons to Own an Annuity

Discover our most frequently asked questions about fixed indexed annuities (FIAs). Get the answers you need to help calculate your path to retirement.

What is an annuity?

Last month, athletes from around the globe came together to compete in the PyeongChang 2018 Winter Olympics. While for some, these games were a debut, others retired from their sport following the competition.

Each Olympian’s journey is unique from its infancy to its end, for every athlete approaches training, competition, and inevitably retirement very differently. However, these athletes tend to all tackle their future with assurance and determination. With 90 percent of Americans lacking confidence in their overall retirement savings situation (IALC data, October 2017), an Olympian’s path can offer invaluable lessons for many retirement savers.

Three things Olympians teach us about retirement:

1. How to embrace the future

When Olympians decide to hang up their skates, put away their skis, or whatever the case may be, they are leaving behind a sport that has been central to their identity. As they move toward a new phase in life, Olympians’ drive to embrace their next chapter serves as a model for all pre-retirees who are planning for their “next big thing.”

Creating a successful retirement begins with embracing what’s ahead and planning for it. Use customizable calculators to run different scenarios and discover how small adjustments could make a big difference for your retirement future, as well as put pen to paper with retirement planning worksheets to determine retirement vehicles right for you.

2. How to pursue a dream

Many elite athletes are in pursuit of the same goal: winning gold at the Olympics. In turn, they put in the hours, hard work, and training needed to fulfill this dream.

To help ensure a financially stable future, pre-retirees should exercise this same determination. With 56 percent of Americans unsure if they will have enough funds to last them through their golden years, they should approach retirement with the same thoughtfulness, time, and effort athletes do in their journeys.

3. How to maximize a support system

Olympic athletes have a large network who play a part in their success: coaches, trainers, family, and friends, to name a few.

Pre-retirees may not know it, but they also have individuals they can turn to – financial professionals willing to help build their nest egg. However, only 39 percent of Americansturn to a qualified individual for financial information or advice. No matter if you are adding fixed indexed annuities or another retirement vehicle to your financial portfolio, seek guidance from a financial professional to see what products are right for you.

Winning gold in retirement

If Americans look to retirement in the same way as Olympic athletes, these years will truly be a #GOLDenRetirement!

https://fiainsights.org/olympic-athletes-can-teach-us-valuable-lessons-about-retirement/

Fixed indexed annuities (FIAs) address many basic retirement concerns: protection of hard-earned dollars, tax-deferred growth, balance, and lifetime income.

Get some peace of mind — no matter what happens in the market. Consider these five key benefits:

Guaranteed Income Stream

With Americans living longer and spending more time in retirement, many retirees are concerned about outliving their savings. In turn, they are searching for a product that can help ensure a steady income stream. Fixed indexed annuities (FIAs) are designed with guaranteed lifetime income so you can never outlive your earnings.

Diversification of Portfolio

A balanced portfolio is essential for managing risk and reward in the financial markets. Designed for the long term, fixed indexed annuities (FIAs) are a great retirement vehicle to ensure you are not putting all your eggs in one basket. FIAs offer the ability to make some money, without the risk of losing it.

Principal is Secure

Even with market volatility, investors will not lose value on their fixed indexed annuities (FIAs). Your savings aren’t exposed to market fluctuations, so even in a negative market return, interest credited will never fall below zero. You can never lose your interest once it’s credited to your principal.

Predictable Earnings

Because fixed indexed annuities (FIAs) offer predictable income, Americans feel more comfortable when withdrawing funds from these retirement vehicles, as opposed to an IRA or 401(k). Choosing an FIA is an efficient way to plan for your future, as your interest earnings rate always remains somewhere between the interest rate floor and the cap. In turn, no matter what happens in the market, you can count on payments throughout your golden years.

Tax-Deferred Growth

Fixed indexed annuities (FIAs) offer long-term tax-deferred savings. As long as your money stays in the annuity, you will not be taxed on interest earnings. Once you receive a payout, the annuity is taxed as ordinary income.

As we celebrate women’s social, economic, cultural, and political achievements this International Women’s Day, the Indexed Annuity Leadership Council (IALC) wants to raise awareness that when it comes to savings, the gender savings gap is still huge.

This post, originally shared on National Life Group Main Street blog on 3/9/17 by Maria McLendon, sheds light on this important issue. 

When it comes to savings, the gender savings gap is huge. A recent study[1] indicated that women have 50% lower savings than their male counterparts. There are a number of reasons that this disparity exists, among these are that, on average, women earn lower salaries than their male counterparts and will spend fewer years in the workforce. However, there are actions that women can take right now, that will help improve their savings and provide a bridge to end the gender savings gap.

1) Start Now

The very first step to eliminating the Gender Savings gap is for women of all ages to start saving now. If you are a parent of a young daughter, start saving on her behalf—even if it is coins in a piggy bank. If you are a young woman just starting your career, start saving now—even if it is just a few dollars a week. By the time you are in your 30s, you should be saving 10-15% of your income and the sooner you start, the more quickly you can get to that rate of savings.

2) Make Consistent, Incremental Increases

Commit to increasing your rate of savings every year. Increasing the amount you save by just $25/month every year could mean that you will have $5,000 more in retirement savings, and an increase of $150/month[2] every year could mean more than $34,000 in savings when you get to retirement.

Check out this image for more ways that incremental increases can make a positive impact on your long-term savings balance.

3) Keep Things Balanced

Make sure that at least a portion of your savings is in lower-risk products that are not subject to loss from economic or stock market volatility. Fixed Annuities and Fixed Indexed Annuities are insurance products that offer guaranteed[3] rates of interest, protect your principle and interest from loss due to market downturns (assuming you don’t make any early withdrawals), and can offer the advantages of tax-deferred savings when part of a retirement plan.

The surest way to make change is to take action. Do something today to help close the gender savings gap for tomorrow.

[1] Women versus men in DC Plans, Vanguard white paper, October 2015.

[2] Assumes a 3% rate of return for 15 years before taxes are assessed. This is a hypothetical example for illustrative purposes only – not representative of any particular investment or insurance product.

[3] Guarantees are dependent on the claims paying ability of the issuing Company. Because they are meant for long-term accumulation, most annuities have surrender charges that are assessed during the early years of the contract if the contract owner surrenders the annuity. In addition, withdrawals prior to age 59 ½ may be subject to a 10% Federal Tax Penalty. All withdrawals made from annuities with pre-tax contributions are taxed as ordinary income. All withdrawals from an annuity purchased with non-qualified monies are taxable as ordinary income only to the extent there is a gain in the policy. Indexed annuities do not directly participate in any stock or equity investments. This is not a solicitation of any specific annuity contract.

Discover 3 Ways to Bridge the Gender Savings Gap On International Women’s Day 2018

You may or may not be doing better than average, but you’re almost certainly doing better than your parents.

Understanding how Annuities Can Pay for Senior Care

An annuity can ensure that a retiree is able to afford assisted living. Immediate annuities promise a steady stream of payments, no matter how long you live. The catch is that you must hand a large chuck of money over to an insurance company that you can’t get back for emergencies or give to heirs, and the costs of this investment can sometimes be high. By providing a guaranteed monthly income, these investment funds will best supplement retirement benefits.

When choosing an annuity, the holder of the annuity can select to send a single payment or a series of payments to the insurance company. The insurance company then, in return for the premium payment(s), sends an annuity, which is a series of regular payments over a specified and defined period of time. Below we are going to briefly cover the two most common types of annuities:

Immediate Annuity

With an immediate annuity, you receive payments immediately after making your initial payment. Immediate annuities are best for people who require immediate income from their annuity. With an immediate long-term care annuity, the insurance company sends a specified monthly income in return for a single premium payment. It is available regardless of current health status. It also has no bearings on whether a person has long-term care insurance or not.

Immediate annuities sold with joint and survivor payout benefits or period-certain options could become problematic. Joint-and-survivor payouts on annuities are a “double-edged sword.” For example, if the spouse winds up in the nursing home s/he may have too much in assets for Medicaid to cover those costs.

What to Know Before Purchasing an Immediate Annuity

Understand your future needs. The amount received may not satisfy long-term care expenses and inflation can reduce the value of the monthly income.

Deferred Annuity

With a deferred annuity, you receive payments at a later date, usually at retirement. Most deferred annuities allow for regular withdrawal payments beginning thirty days after buying an annuity, up to 10% per year, in most cases. With a deferred annuity you can invest either a lump sum all at once or make periodic payments, either fixed or variable. That money grows tax-deferred until you wish to start receiving payments. Studies show that deferred annuities comprise the vast majority of all annuity sales in the U.S., and are best suited for the long-term costs of health care for the elderly.

The stream of guaranteed income goes for a period of time or for the rest of one’s life. The amount depends on the initial premium, the person’s age, and gender. Women receive a smaller monthly payment over a longer period of time than do men of the same age, due to longevity.

Oftentimes, an elder law attorney has to undo deferred annuities so that a client can qualify for Medicaid. If this happens, the client may pay steep surrender fees. Or, annuities can convert to actuarially sound immediate annuities for Medicaid.

The deferred long-term care annuity is available to people up to age 85. A person can receive a stream of monthly income for a specified period of time in exchange for a single premium payment. The annuity creates two funds: one for long-term care expenses and another separate fund that you can use however you desire.

To qualify for a deferred long-term care annuity, you must satisfy some health criteria.

What to Know Before Purchasing a Deferred Annuity:

Consider these things when considering a deferred long-term care annuity:

• If the fund is not used, it passes on to heirs. A deferred annuity that passes on to heirs can affect your Medicaid eligibility.
• Long-term care expenses may run higher than the monthly installments.
• The long-term care portion may satisfy the tax-qualified long-term care policy requirements but has a complicated effect on taxes. Consult your tax professional before purchasing one.
• It can affect Medicaid eligibility at the time a person needs nursing home care and runs out of money. It’s having the wrong kind of annuity that could prevent the person from qualifying for Medicaid.

Annuities Impact on Medicaid Benefits

In most states, an annuity is exempt as an asset for Medicaid when:

• The annuity is binding and non-transferable and cannot be redeemed or sold. So, deferred annuities are countable as assets for Medicaid. If the annuity can withdraw cash, counts as an asset.
• The annuity has to pay you back, the entire cost within the life expectancy set forth in tables disseminated by Medicaid.

Caution: Be wary of annuities sold as a “Medicaid annuity.”

The Benefit of Annuities

You receive money regularly, even if the premium costs runs out. So, if you have a long life, you get more back than you put in. The company underwriter takes the risk that if you die early, they benefit.

Annuities are not counted as assets by Medicaid when you apply for government assistance. The income from the annuity counts as a “resource,” but the larger sum originally used for to buy, is not. Someone applying for Medicaid medical coverage allows $2,000 ($3,000 for a couple) in cash, savings, or other assets, plus a number of other assets that are “exempt” (not counted) from Medicaid eligibility rules.

When investing in annuities, beware of deceitful marketing schemes selling annuities that target susceptible seniors, like Medicaid annuities. You’ll find them sold at adult education seminars, telemarketing schemes, and through biased advertising. It’s more common than most seniors realize.

Always use your common sense; if it sounds too good, it possibly is a scam.

Other Tips

Choose a reputable company when you buy an annuity, and work with a representative who comes highly recommended. Ask the sales representative to help you think through some of the details, like inflation.

This Valentine’s Day, join the Indexed Annuity Leadership Council (IALC) in spreading the love for fixed indexed annuities (FIAs). With the ability to grow and protect your nest egg, FIAs could be the long-term relationship you have been looking for to ensure a steady income stream during retirement.

Designed for the long run, FIAs won’t break your heart, as you work toward reaching your retirement goals. Here are five reasons you should love a FIA:

1. 100% Principal Protection: With 100% principal protection, FIAs can be the key to your heart’s desire, as well as a retirement portfolio with minimized risk. Even when market volatility occurs, like the recent Dow Jones fluctuations, your principal investment remains protected.
2. Balance: Balance is not only important for your relationship, but also your financial future, as portfolio diversification helps manage risks and rewards in the financial market. FIAs are a great option to diversify, ensuring you are not putting all your eggs in one basket.
3. Growth Potential: Trust and stability are important in any relationship. FIAs are unique in that they offer a growth opportunity over a set time period, insulating your savings from the uncertainty of the market and creating peace of mind. Once earned through a FIA, interest credits are locked in and cannot be lost. The principal on the investment is also always protected, as long as you continue through the length of your contact.
4. Guaranteed Lifetime Income: FIAs are a retirement vehicle that helps ensure you won’t outlive your savings, providing a steady, guaranteed lifetime income stream in retirement. A love that lasts a lifetime can come in many different forms.
5. Tax Deferred Growth: With FIAs, you are required to pay taxes on your earnings, as long as your money stays in the annuity. Now, if only you could say the same for that box of chocolates.

Given all the benefits this retirement vehicle offers, we even bet Cupid is likely to shoot his arrow and fall in love with a FIA – a good long-term relationship for all.

With President Trump signing the most sweeping overhaul of the U.S. tax reform system in more than twenty years, you may be questioning the future of your retirement planning portfolios.

Even though no notable retirement plan provisions were included in the final tax bill, the IALC’s Executive Director Jim Poolman shares a valuable lesson from the debate in a new Forbes article. He explains how tax reform has taught us more than ever that Americans need to examine and evaluate their current retirement savings strategies, while educating themselves on all available options for planning.

In his article ‘Tax Reform Reawakens Need to Examine and Evaluate Retirement Savings Plans,’ Poolman shares three ways you can work toward creating peace of mind when it comes to your financial future.

Read his latest article to familiarize yourself with three steps for getting ahead today.

Wondering How Tax Reform Will Affect Your Retirement Savings Plans? Executive Director Jim Poolman Weighs In.

Social Security will look a bit different in 2018. Every year, Americans eagerly await the announcement outlining the various changes being made to what many consider the most important social program in the country. Will your benefits increase? What about the strict guidelines tethered to the program? Will they be modified in a way that affects your ability to get by? These are all questions 46 million of America’s seniors and 66 million overall worry about every fall.

The Social Security Administration released its adjustment reports for 2018. Here is what you need to know about the changes being made to Social Security in 2018 and how they’re probably going to affect you.

1. You’ll (sort of) get a raise

With the release of the January 2018 Cost of Living Adjustment, Americans can now stop wondering what will happen to their monthly payouts. This year, seniors will receive a 2% increase in COLAs, which amounts to about $27 per month more on average. Singles will receive an average of $1,404, and couples who are both receiving payments will receive $2,340, a full $46 more monthly. The maximum possible Social Security benefit for those who begin collecting benefits at full retirement age will also increase to $2,788 in 2018.

What this means for you

In 2017, Americans saw benefits increase by just 0.03%, so this increase is a welcome change of pace for those living on a fixed income. The COLA hasn’t been this high for six years. But don’t break out the champagne and credit cards just yet. Most Americans won’t notice any difference in their monthly checks, as the increase in Medicare Part B premiums automatically deducted from your benefits will likely offset any boost.

A higher tax cap hits wealthier Americans

Workers are required to pay a 12.4% payroll tax into Social Security, but your employer usually picks up 50% of the tab. This means most Americans will pay 6.2% of their earned income to Social Security until their income exceeds $127,200. In 2018, however, this cap rises $1,500 to $128,700, meaning wealthier individuals should expect to fork over an extra $93 in tax at minimum next year. However, those who earn more than the taxable maximum will not have those earnings taxed.

What this means for you

The Social Security Administration predicts roughly 12 million people will pay higher taxes beginning January 1, 2018, as a result of this change. At first glance, this may anger those who are affected by the jump, but when you look at the bigger picture, it’s much more reasonable. Last year, the wage base increased a whopping $8,700, or roughly $540 more per month.

Changes in the wage base are determined by the national wage growth. Because 2016 saw no change, the 2017 adjustment accounted for two years of growth. That was not the case this year.

An older retirement age

Something unique about the 2018 Social Security changes is that the full retirement age will rise. Everyone born between 1943 and 1954 must wait until they are 66 to receive 100% of their monthly benefit. Full retirement age for those born in 1956 is now 66 and 4 months. This is a two-month increase from 2017, when the full retirement age for people born in 1955 ticked up to 66 and 2 months.

What this means for you

You can sign up for Social Security at age 62, but you’ll receive a reduced payout. It’s not until you reach your designated full retirement age that you’ll get your full benefit. This means older workers affected by this change will have less time to boost payments via delayed claiming.

“There are fewer months between the ages of 67 and 70 to earn delayed retirement credits, meaning the maximum benefit is lower with a full retirement age of 67 versus 66,” William Meyer, founder and managing principal of Social Security Solutions, tells US News.

The earnings limit is going up, too

While there’s no law prohibiting you from working and receiving benefits simultaneously, there is an earnings limit for people who retire before their full retirement age. Fortunately, this limit will increase in 2018. Next year, the limit will rise to $17,040, up $120 more than in 2017. The earnings limit expands by $480 to $45,360 for those who reach full retirement age in 2018.

What this means for you

Working during retirement is a wise choice, but even with larger earnings limits, you’re still at risk of penalty should you exceed the ceiling. If you earn too much, Social Security will withhold $1 for every $2 earned above the limit. The penalty decreases for those at full retirement age to

Additional security for Social Security

Not all Social Security changes are meant to be stressful. In fact, some might even be considered relieving. 2018 is bringing additional security features to the Social Security website. Account holders will notice two-factor authentication to access personal information. Although this began in May 2017, users must now enter a one-time code, in addition to a username and password, to log in online.

April 2018 will also mark the debut of new Medicare cards without Social Security numbers printed on them. New Medicare cards will contain a complex combination of letters and numbers to better protect your personal information.

What this means for you

The effort to beef up cybersecurity may be met with opposition from seniors who disapprove of technology’s widespread integration, but recent data breaches and cyber hacks threatening millions of Americans’ private information make these changes necessary.

“The goal of the initiative to remove Social Security numbers from Medicare cards is to help prevent fraud, combat identify theft, and safeguard taxpayer dollars,” said CMS Administrator Seema Verma to CMS.gov.

Identity theft is on the rise for those age 65 and older. So while these additional security measures are warranted, they should in no way replace due diligence on your part to keep your Social Security information safe.

Social Security is going digital

The SSA announced in a blog post they will officially terminate paper statements to everyone under age 60 in 2017. “We know that our cutbacks will affect many of you, but we have no choice. We will continue to serve you and work for you as best we can.”

Like most things these days, getting your earnings history via the mail is a thing of the past. If you want to check your earnings history, you must create an online my Social Security account. You’ll be able to check your Social Security status at any time via this portal only.

What this means for you

The SSA predicted its decision to mail fewer paper statements would cut costs by $11.3 million in 2017, so the need to mail even less in 2018 is likely another attempt to save money.

People who receive Social Security Disability Insurance benefits will be able to report wages online through these new services as well. It’s a convenience that eliminates the need for SSDI beneficiaries to visit a field office to report their wages in person, as they can now print an earnings receipt at home online.

More adjustments to disability thresholds

Social Security isn’t just for retirees. Nearly 14 million people qualify for monthly disability payments from the SSA. Those who receive disability income from Social Security are also in line to see a rise in monthly earnings. Estimated average Social Security benefits payable in 2018 for all disabled workers will increase from $1,173 to $1,197. People who are legally blind will earn $20 more in 2018, up to $1,970. Non-blind people will see their maximum threshold increase by $10 per month to $1,180.

What this means for you

2018 looks to be a year where improvements are made to the disability program overall. Social Security hosted a National Disability forum in November 2017 to acquire input on inclusion to the List of Compassionate Allowances and Rare Diseases. As stated in the newsletter, “Experts in the field of rare diseases will share their research and suggestions for Compassionate Allowances conditions. Patient organizations will share extensive information on conditions and recommend conditions for inclusion to the List of Compassionate Allowances.”

Social Security will also continue what’s known as a trial work period for those who’d like to try their hand returning to the workforce. The trial period allows the beneficiary to collect benefits and earnings at the same time.

What you can do to prepare

Trying to effectively manage yearly changes to Social Security could easily add a few gray hairs to your head. But the same downside to such uncertainty is also the silver lining. The only thing that’s constant is change itself, so once you learn to expect such modifications, you can plan for them appropriately.

Obviously, an emergency fund will help offset any substantial Social Security cost increases year over year. But those who effectively budget for their retirement years and beyond should have little issue taking these changes in stride. Crunch your numbers realistically before committing to a full retirement to determine your necessary monthly expenses. Then, figure a way to live slightly below your means so you can build a reasonable savings account throughout your later years. This could be achieved by working a part-time job for supplemental income, downsizing your home and accompanying living expenses, or increasing your retirement contributionsduring your highest-earning income years to pad your savings for future use.

Older Retirement Ages and More Social Security Changes Coming in 2018

Three Ways to Help Americans Save More for Retirement

Many retirement investors use annuities for guaranteed income. But some find their annuity payout options to be confusing. There are a variety of methods to receive annuity income payments. With so many choices, it can be hard to decide what’s right for you.

People tend to feel more confident in their decisions when they are well-informed. So, this article will take a look at some common annuity payout options and how they are defined.

Before going into basic details, it’s important to recognize that your payout choices will differ among insurance companies. Some carriers may not provide the same annuity payout options you have with another carrier. Or the specific conditions and details of the payout options might vary. Keep this in mind as you choose how you want your future income payments to be calculated.

Annuity Payout Options

You may choose from a few methods of how you will get annuity payouts. Nowadays, the two most common are annuitization and a systematic withdrawal schedule.

With annuitization, you convert the money in your contract into a permanent stream of income payments that is irreversible. Once done, you can’t take it back. The benefit is you receive guaranteed monthly income, but on the flip-side, you lose control over access to your money.

Under a systematic withdrawal schedule, you enjoy total control over the timing of your income payouts. Usually this is done with a lifetime income rider.

While you have more freedom with this method, the income rider comes at additional annual cost, and you may outlive the lump-sum value of your annuity. The rider can provide you with lifelong income payouts, though.

Your Options with Annuitization

The annuitization method comes with a variety of options. As you read through these, keep in mind that they differ whether you have an immediate or a deferred annuity contract. With that said, your annuity payout options can include:

Life-Only

This option gives you income payments for life. Generally, it gives you the highest payout because payment calculations are based only on the annuitant’s life expectancy. While it can give the highest amount, once the annuitant passes away, the insurance company keeps the remaining balance in the contract.

Period Certain Only

This option guarantees income for a fixed number of years. It usually starts at 5 years and can go up to 20 years. Should death occur before the period certain ends, the payouts would go to a stated beneficiary.

Life and Period Certain

Under this option, you receive income payouts for life, with a guaranteed payment period lasting for a fixed number of years. In many contracts, the guaranteed period starts at 5 years and goes as far as 20 years. If death occurred during the guaranteed period, a named beneficiary would receive the payments until the end of the period.

Should you live past the end of the guaranteed period, you would receive income payments for life.

Joint and Survivor

Under this option, the insurance carrier pays out income as long as either someone or their named beneficiary, often a spouse, lives. When one partner passes away, the surviving spouse continues to receive payments for their lifetime. Since this survivorship feature is an added benefit, each income payout is smaller than what people might get with a life-only payout option.

Installment Refund

With this option, income is payable for a lifetime. Once death occurs, a named beneficiary continues to take the annuity payouts until all payments are equal to the initial premium paid into the contract.

Cash Refund

This option provides someone with payments over their lifetime. Upon death, a named beneficiary gets a lump-sum payment equal to the initial premium paid into the contract, less the amount of total income that has already been paid out.

Flexibility with Systematic Withdrawal Schedule

With this method, you may choose the payout amount you receive each month. You can also select how many payments you want to receive. In some annuity contracts with an income rider, you may be able to turn income payments “on” and “off,” but certain conditions and terms will apply.

If your payout strategy was a managed withdrawal schedule using an income rider, the rider benefit would come at additional cost. This would be an annual fee you pay, and while it can vary among insurance carriers, some contracts specify a rider fee of 0.95%.

Another trade-off is you might outlive the lump-sum value of your contract over time. This can be an important factor to consider for those who might have legacy or estate planning goals for their money.

Consumer Annuity Payout Choices Vary by Annuity Type

Payout options can vary with the type of annuity you have. For instance, a systematic withdrawal schedule, using a lifetime income rider, generally arises with a fixed index annuity.

With that said, most people don’t choose annuitization with longer-term contracts than immediate annuities, like fixed index annuities.

Ruark Consulting has found that annuitization rates have been staying at or below 2% since 2014. While this was a finding among variable annuities, it does illustrate what people are choosing for income payouts.

Instead of annuitization, many people with deferred annuities choose a systematic withdrawal schedule or a lump sum value.

Choosing a Lump-Sum Value

Not everyone chooses one of these methods for income payouts. Some people opt for a lump sum. For people considering this option, it’s important to consider potential tax consequences. Taking a lump-sum payment can drastically boost your taxable income for the year.

However, it may be possible to roll over annuity money into an IRA or another tax-deferred retirement account, without triggering tax liability. Check with qualified financial and tax professionals for guidance with your personal situation.

Choosing Not to Receive Payments

In other cases, some Americans elect to keep their money in the annuity. They may not need the income. If you find this the case, you will want to be sure that your beneficiary designation is named correctly.

Depending on how you paid for the annuity, you may face future tax obligations with required minimum distributions, once you reach age 70.5. That’s important to note, as neglecting RMDs can result in a 50% excise tax on the required amount to be withdrawn.

Final Thoughts on Navigating Annuity Payout Options

While this is a good overview of different annuity payout options, it’s not exhaustive. Working through the different choices takes careful due diligence and consideration. It’s not an easy decision, but you will want to consider your goals, how much income you will need each month, and for how long you might need the income. A qualified financial professional can help you answer these questions and decide what might make sense for you.

https://safemoney.com/blog/annuity/annuity-payout-options

Fixed annuity sales have bright prospects in the next five years, due in large part to anticipated strength in sales of income annuities and fixed index annuities, according to researcher Joseph E. Montminy.

In fact, income annuity sales are on such a tear that “their sales will double by year 2018,” predicted the assistant vice president at LIMRA Secure Retirement Institute (LIMRA SRI).

In 2013, income annuities totaled $10.5 billion, but by year 2018, they will likely total over $21 billion, he predicted.

Montminy discussed prospects for income annuities and fixed index annuities during an interview with InsuranceNewsNet in advance of his presentation on annuities here today at the annual Retirement Industry Conference. The meeting is co-sponsored by   LIMRA-LOMA Secure Retirement Institute  and Society of Actuaries.

Income annuities

According to LIMRA SRI figures, the 2013 income annuity sales total included $8.3 billion in sales of single premium immediate annuities (SPIAs), which start paying an income stream shortly after purchase. The total also included $2.2 billion in sales of deferred income annuities (DIAs), which start paying an income stream several years from policy purchase.

Montminy believes both products will enjoy strong sales gains in the next five years for several reasons.

For one thing, the products offer a simple value proposition, and that allows them to provide maximum payouts to the customer, he said.

Demand is another factor. Simply put, baby boomers will need more guaranteed retirement income as they reach retirement, he said, and some boomers will buy income annuities for that purpose.

Montminy pointed to the widely-expected upswing in interest rates in coming years as another factor. When the rates go up higher than where they are now, the payouts from income annuities purchased in that environment will be higher than they are today, making the products all the more appealing.

In addition, he said that the DIA side of the business is growing. There were only three insurers offering DIAs in 2011, he recalled, but there are 11 carriers selling the products now and “more are expected to enter the market this year.”

Three-fourths of the money going into the DIA products is coming from individual retirement accounts (IRAs), he said, “so as the IRA market grows, the sales volume in DIAs will grow.”

FIA trends

As for fixed index annuities (FIAs), the products sold in record numbers last year — LIMRA SRI estimates the year-end total at $39.3 billion — and Montminy believes they will continue to do well out through 2018.

“In 2014 alone, a FIA sales growth of 10 percent to 15 percent would not be unrealistic,” he said.

As with income annuity sales, rising interest rates will be a factor in the growth of FIA sales. As rates go up, the carriers will be able to increase the caps on interest credited to the policies, and that will help support accumulation-related sales, Montminy said.

Guaranteed living withdrawal benefit riders will help drive FIA sales too, he predicted. In 2013, almost eight out of every 10 sales had such a rider available for sale. LIMRA SRI’s research found that seven of every 10 FIA sales that year had the feature elected when it was available. Montminy believes this trend will continue due to anticipated growth in demand for retirement income solutions.

In 2013, FIAs with the GLWB rider attached accounted for nearly $21 billion of sales, according to LIMRA SRI estimates. That’s a little over half of the year’s total FIA sales volume.

Product development is a factor too. FIA carriers are coming out with different strategies in crediting interest, including customized or uncapped strategies.  The new options are attracting sales, he said.

Finally, more companies are sharing in the growth of the market, and that will likely continue, according to Montminy. For instance, according to LIMRA SRI figures, the market share for the top five FIA carriers has dropped in recent years, to the point that only half of the FIA sales in 2013 came from the top five carriers. By comparison, in 2009, fully two-thirds of all FIA sales came from the top five. That means “the sales are not as top-heavy as they were,” he said.

Regulators will continue to keep an eye on both fixed index annuities and variable annuities, Montminy predicted. But that is not due to increases in regulatory violations. “Insurance companies did a nice job with improving policy design and strengthening suitability, to ensure the products are being sold to the people for whom they are geared,” he said. Now, he said, the regulators will keep watch “to be sure sales stay suitable.”

Living comfortably in retirement is indeed possible. However, many Americans fail to develop a strategic plan that allows stability in their golden years to be reality.

In fact, the Indexed Annuity Leadership Council (IALC) commissioned data that found insights into American’s retirement savings – or lack thereof. Nearly 90 percent of Americans are not very confident in their retirement savings situation, with 56 percent admitting they are unsure if their retirement savings will last throughout their golden years, and 1 in 5 sharing they have nothing saved for retirement at all.

Ensure you have the right strategies in place to help build a stable retirement. This is not a one-size-fits-all type of process. When planning, it is important to find a retirement equation to fit your goals, needs, and lifestyle. However, there are universal tips to keep in mind as you map out a plan.

Consider the following:

1. Remember the time is now.
When beginning, or adjusting, your retirement plan, there is no better time to start then the
present. We understand taking the first step can often be intimidating and overwhelming, as
retirement takes careful planning. However, there are plenty of resources at your fingertips to make
it easy to begin now. Don’t put it off because you do not know where to start. Remember, planning is
the first step of the process.

2. Seek help from a financial professional.
While friends and family are great for putting you at ease and answering your questions, we
recommended also seeking guidance from a professional. A financial professional has the knowledge and
training to help you review your current assets, prepare for your future, establish short and long-
term goals, and provide you with all available savings options.

3. Determine how much additional retirement income you will need.
When deciding how much savings you will need, don’t forget to assess your current portfolio. Before
adding additional products, calculate the rate of return for each of your current assets, such as
401(k), Social Security, and/or pension plans. From there, consider your fixed monthly costs (ex:
housing, food, transportation), discretionary costs (ex: activities, hobbies, travel), and projected
costs (ex: medical expenses, inflation, taxes). This will give you a total to strive toward. Our
retirement calculators can help, especially those that calculate propensity for risk and determine
how external factors, like inflation, may influence savings plans.

4. Create balance in your retirement portfolio.
IALC commissioned data found only nine percent of Americans are focused on diversifying their
portfolio. It may be hard to create diversity, when you are unsure what products to add to your
portfolio. One often overlooked product is a fixed indexed annuity (FIA), a product that helps
protects savings from external factors and can help ensure a steady stream of income for retirement.
Regardless of market swings, a portion of your retirement savings is always protected, thanks to
FIAs. Mitigating your portfolio, with both safe and riskier products, is key to balancing risk and
reward in the market.

With these considerations in mind, you are on the path to achieving the retirement equation for stability.

Retirement Equation for Stability

People crave guaranteed income in retirement, but they cringe at the mention of the word “annuity.” That disconnect can make it tough to ensure a steady flow of dollars in later life.

One answer: Go with an annuity, but keep it simple.

The appeal of lifetime income is clear in a recent study: Six in 10 people ages 55 and older place a high value on having guaranteed income to supplement what they’ll get from Social Security, according to market researcher Greenwald & Associates and CANNEX, a company which provides annuity-related services to financial institutions. Survey respondents said the benefits of extra assured income include protection against outliving your savings, peace of mind and greater assurance you’ll be able to maintain your lifestyle in retirement.

So why then are so many retirees reluctant to invest their savings in annuities, which are issued by insurance companies and can provide regular income payments for as long as you live? The short answer from the survey respondents: They’re put off by annuities’ complexity and cost.

I would put the results of this study into the “I’m not surprised at all” category. For more than 30 years I’ve been writing about annuities and fielding readers’ questions about them. So I can personally attest that when it comes to annuities most people are (pick a word): confused, flummoxed, misinformed, mystified, baffled, bewildered, totally lost…you get the idea. (To sort through the confusion, read 5 Big Misconceptions About Using Annuities.)

Complexity vs. Simplicity

And who can blame them? Some annuities seem almost designed to resist the normal human capacity for understanding, whether it’s variable annuities with their perplexing panoply of fees (mortality and expense, investment management, death benefit and living benefit fees, surrender charges, etc.) or fixed index annuities with their arcane formulas for calculating returns (monthly or annual “point to point,” the averaging method, caps and spreads).

Fortunately, there’s an easy way to get the upside that annuities can offer while sidestepping the complexity and onerous fees. Stick to annuities that eschew expensive bells and whistles and focus instead on what annuities do best: provide reliable income that you can’t outlive. In short, opt for annuities that keep it simple (or at least, given that we are talking about annuities, relatively simple).

There are two types of annuities that fit this description: immediate annuities and longevity annuities. With an immediate annuity, you hand over a lump sum to an insurance company in return for monthly payments that will begin immediately (hence the name) and that will continue the rest of your life, no matter how long that may be. Today, for example, a 65-year-0ld man putting $100,000 into an immediate annuity would receive about $560 a month for life. A 65-year-old woman would get about $530 a month, while a 65-year-0ld man-and-woman couple investing $100,000 could count on a monthly payment of about $470 as long as either one is alive.

A longevity annuity works on the same principle except that instead of starting immediately, the payments begin at some point in the future, say, 10 to 20 years down the road. So, for example, a 65-year-old man who invests $50,000 in a longevity annuity that will begin making payments in 20 years would receive just under $2,000 a month for life starting at age 85. A woman and a man-and-woman couple would receive about $1,600 and $1,125, respectively.

A longevity annuity allows you to feel more secure about spending from your nest egg early in retirement: You know that even if your savings run low you’ll have those longevity annuity payments kicking in later on.

Easy Comparisons

With both these types of annuities, you know what you’re giving up, and you know what you’re getting in return. The fact that you are simply buying a fixed monthly payment makes it easy to compare one insurance company’s annuity against another’s (although you do have to allow for the fact that payments from insurers with higher financial strength ratings from companies like Standard & Poor’s and A.M. Best will generally be lower than those with high ratings).

Of course, like any investment, immediate and longevity annuities have drawbacks. If you end up dying sooner than you expect, you’ll have shelled out a large sum for a relatively small number of payments, or perhaps no payments at all in the case of a longevity annuity if you die before the payments begin. That possibility galls many potential buyers. It was the No. 3 objection raised by respondents to the recent survey on annuities.

Clearly, buying an immediate or longevity annuity doesn’t make much sense if you’re pretty certain you’ll die early in retirement. (If you’re married or have a partner, however, you’ll also want to take both of your potential lifespans into account.) And an annuity is superfluous if your Social Security and any pension will cover all or most of your essential living expenses, or if your nest egg is so large that your chances of outliving your savings are minuscule. I’m sure Bill Gates, with his estimated net worth of $86 billion, will be able to manage just fine in retirement without an annuity.

Another downside is that once you give up your money in return for lifetime annuity payments, you no longer have access to it. So you wouldn’t want to put all, or probably even most, of your savings into such annuities.

But if you decide you need more guaranteed income or you just feel more secure knowing you’ll have more assured income you can count on even if the financial markets experience a severe setback—don’t be put off by the complexity and high cost of certain annuities. An immediate or longevity annuity can be an efficient and cost-effective way to get you the lifetime income you seek.

http://time.com/money/4713497/guaranteed-retirement-income-annuities/

Recent research by retirement income expert and former U.S. Treasury Department official Mark Warshawsky shows that immediate annuities generally provide you with more lifetime income than you could get by following the take-out-4-percent-of-savings-a-year rule or a similar strategy of systematic withdrawals.

One reason: Annuities have a unique and valuable advantage investors simply can’t duplicate on their own.

There are plenty of valid reasons not to buy an immediate annuity. You may not need more guaranteed income than Social Security alone will provide. Or maybe you’re just not comfortable with losing access to your money after investing it.

Two Little Words You Need to Know

But if you’ve rejected an immediate annuity because you think you can generate the same level of guaranteed lifetime income investing on your own, I have two little words for you: mortality credits.

If you think you can generate the same guaranteed lifetime income on your own, I have two words for you: mortality credits.

What in the world, you may ask, are mortality credits?

Well, basically they’re little supplements, so to speak, that insurers factor into an immediate annuity’s monthly payout to reflect the fact that some annuity owners will die sooner than others. The idea is that the monthly payments that would have gone to the annuity owners who die early are effectively being transferred to the annuity owners who live a long life. Which means that the annuity payment you receive includes not just investment gains and the return of your original investment, but mortality credits as well.

You can think of them as an extra source of return that you can’t get from any other investment.

Why This Annuity Gives You an Edge

So in practical terms, how do mortality credits — as well as an annuity’s guarantee of a steady lifetime payment — translate into an edge over simply investing your money and carefully drawing it down? Here’s an example.

Let’s say you’re a 65-old-man and you have $100,000 you would like to convert to reliable income that will sustain you for the rest of your life.

You could invest that hundred grand in an immediate annuity, and at today’s payout rates you would receive about $565 a month as long as you live. (To see how that payment might vary based on the amount invested, age, sex and for both singles and couples —where income continues as long as either person is alive — you can check out this immediate annuity payment calculator.)

Or instead of buying the annuity you could invest your $100,000 and draw a monthly payment from it.

Question is, though, can you get the same monthly income (or more) than the annuity provides by investing on your own?

Since you want to be sure you can rely on this income the rest of your life, you’re going to have to stick to low-risk investments. Otherwise, you could hit a rough patch where returns dip precipitously and your money runs out.

Running Out of Money at 83

So let’s say you invest your hundred grand in something relatively stable like 10-year Treasury bonds, which recently yielded about 2.2 percent.

Assuming you withdraw $565 each month — the same amount the immediate annuity guarantees for life — your $100,000 would last just under 18 years. Which means you would run through your stash at about age 83.

That may be fine if you think you won’t live beyond 83. But the chances are pretty good that you will. The Society of Actuaries estimates that a 65-year-old man has a life expectancy of 86 to 87. And since many, many people live well beyond their life expectancy, there’s a very good chance you could run through your $100,000 while you still have years to live.

Of course, your $100,000 would last longer if you earn a higher return. At 4 percent a year, the $565-a-month payments would last four more years until age 87, and at a 6 percent return they would last until age 98.

But the problem — aside from the fact that lofty returns are harder to come by these days — is that higher returns come with more volatility, which increases the risk that, far from lasting longer, your dough could run out sooner than you expect. (To see how long a given sum might last invested in varying mixes of stocks and bonds, check out the retirement income calculator in RDR’s Retirement Toolbox.)

Who Shouldn’t Own Immediate Annuities

So does the example above mean that every retiree should own an immediate annuity? Not at all.

If you have good reason to believe you’ll die before you reach life expectancy, an annuity isn’t a good choice, since you’ll be the one providing mortality credits to those annuity owners who go own to live long lives.

And if Social Security’s payments are already covering all or most of your basic living expenses, you may already have all the guaranteed income you need.

Even if you think an immediate annuity is right for you, you would want to invest only a portion of your savings in one, leaving the rest in a mix of stocks, bonds and cash that can provide liquidity for emergencies as well as long-term growth to maintain your purchasing power in the face of inflation.

How to Shop for Annuities

And if you do decide to purchase an annuity, you’ll want to shop around (payouts can easily from insurer to insurer by 8 to 10 percent) and take other steps to assure that you can rely on those payments coming in the rest of your life, including sticking to annuities of highly-rated insurers and keeping the amount you invest with any single insurer below the coverage limit of your state’s life and health insurance guaranty association.

Finally, you may also want to buy in stages over a few years instead of putting your money in all at once.

All else equal, annuity payments are smaller when interest rates are low as is the case today (which no doubt accounts for the fact that immediate annuity sales have been declining lately, falling almost 20 percent the first half of this year). But if you buy in gradually, you’ll reduce the chance of investing all your money when rates are at a trough.

The upshot, though, is that unless you’re willing to take on more investing risk — which also means accepting the possibility of running through your money while you’re still alive — it’s very unlikely that you can match an immediate annuity’s guarantee of lifetime payments, which includes that extra bit of income that mortality credits provide.

Or to put it another way, if you decide an immediate annuity isn’t the right choice for you, that’s fine. Just don’t fool yourself into thinking it’s because you can match or exceed what an annuity offers by investing on your own.

Actual Article Link: http://www.nextavenue.org/a-guaranteed-income-source-to-beat-your-investments/

Today, Americans are faced with endless uncertainty, like what’s ahead for the tax code, health care and Social Security, to name a few. But removing some uncertainty surrounding retirement is an obtainable goal all Americans can strive to achieve.

The retirement crisis has become a staple in our country’s rhetoric, and it has escalated in recent years due to steadily growing life expectancies, two recessions and almost a decade of sluggish economic growth, according to Marketplace.org. At the same time, the Society for Human Resource Management (SHRM) points to the declining number of employers offering retirement plans after decades of growth. Given the current environment, the media, researchers, economists and others are raising the red flag, calling on Americans to carefully examine their retirement preparedness plans to ensure they are saving enough.

Despite the growing spotlight on retirement planning and the definite possibility of reaching financial certainty in retirement, individuals are taking little to no action when it comes to planning for their future. New data released in October from the Indexed Annuity Leadership Council (IALC), of which I serve as Executive Director, shows that most Americans are only adding to an uncertain future by either not creating a financially secure retirement plan or, even worse, not saving for retirement at all. More than half of Americans admitted they do not have a retirement plan that will carry them through their golden years, voicing concern they may outlive their retirement savings. One in five reported having absolutely nothing saved for retirement.

Americans, regardless of age, must take steps to ensure financially stable retirements — ones that allow them to alleviate uncertainty while crossing items off their bucket lists and simultaneously managing essential costs of living.

A potential contributing factor behind retirement planning uncertainty is that Americans are not self-assured, particularly when it comes to researching their available options and how much they need to be saving for retirement. In fact, according to the Employee Benefit Research Institute (EBRI), just 18% of Americans say they are confident in their retirement savings. Meanwhile, roughly one-third aren’t certain of how much they will need in retirement to cover even basic living expenses.

It’s hard to achieve retirement certainty when you aren’t confident in your planning abilities and don’t know where to turn for more information. However, there is good news for those struggling to prepare for a post-work world: It’s easier than you think to increase your financial knowledge and confidence. Start with three simple steps:

1. Spend less and save more. Manage your spending by beginning to look at purchases with a more critical eye. It’s amazing the amount you will save by doing things like choosing to make a meal at home or using a coupon on an item you need. The money saved, regardless of the amount, can help you get ahead on retirement savings.

2. Make use of financial resources. Saving for retirement can seem complicated, but there are plenty of resources available at your fingertips, including tools like retirement calculators to estimate your retirement living expenses and determine your potential Social Security income.

3. Diversify your portfolio. Once you know how much you’ll need for retirement, you can evaluate your current savings plan and the products in your portfolio, assessing whether or not they are effectively working together to achieve your retirement goals. After taking a holistic view of your portfolio, you may need to diversify to maximize potential gain and minimize risk, including considering options like fixed indexed annuities that help to offer a guaranteed stream of income, no matter how long you live. A diversification strategy can ensure balance and provide retirement planning peace of mind. Investopedia sums it up well: “Don’t put all of your eggs in one basket. It’s really that simple.” Betting your entire retirement on a single product or product class can put you at extreme risk for an unstable retirement.

However, upping your retirement confidence doesn’t have to be all figures and calculations — it can even be entertaining. Test your knowledge and see where your retirement IQ stacks up by trying your hand at some online games and tests, like this quiz from Kiplinger, this one from AARP or even the “Master of Retirement” game created by IALC. The above steps, coupled with fun learning tools, can help you gain a better understanding of retirement needs and boost your confidence.

No matter how you educate yourself, there’s no better time than now to take control of your financial future and create peace of mind when it comes to your retirement plan. In a world of uncertainty, one thing is for sure: It’s time to make a financial move and start planning for your golden years.

Actual Article: https://www.forbes.com/sites/forbesfinancecouncil/2017/11/08/these-are-uncertain-times-but-reaching-financial-certainty-in-retirement-is-still-possible/

Last week, the IALC launched its interactive game Master of Retirement. Shocking new data points, found from IALC surveys, power the game’s questions and demonstrate the need to offer approachable and light-hearted ways of boosting Americans’ confidence when it comes to saving for retirement.

In the coming days, we will share tips to help you rise in the retirement ranks. Start by checking out the below hints to lift your Master of Retirement score and increase your retirement planning IQ along the way.

The Question: What is a reason some people choose a fixed indexed annuity?

1. Missing a steady paycheck and income for life
2. Having the principal protected against volatile markets
3. Helping to moderate risk in a financial plan
4. All of the above

The Answer: D! While half of Americans say they will miss receiving a steady paycheck in retirement the most, moderating risk in a financial plan and protecting the principal are also top of mind. Fixed indexed annuities can provide a guaranteed lifetime income stream, while offering balance and minimizing risk in your retirement plan.

The Question: What percentage of men are “very confident” in their ability to fully retire with a comfortable lifestyle?

1. 100 percent
2. 19 percent
3. 1 percent
4. 50 percent

The Answer: B! Only 19 percent of men are “very confident” in their ability to fully retire with a comfortable lifestyle, compared to just 10 percent of women.

The Question: How many people would not be able to pay an unexpected bill of $500 or more?

1. About 20 percent
2. Almost 100 percent
3. About 90 percent
4. Everyone can pay an unexpected bill

The Answer: A! According to a survey by the IALC, 22 percent of Americans report they wouldn’t be able to pay an unexpected bill of $500 or more without borrowing money.

As you play the game, remember just like with actual retirement planning, you are balancing risk and reward, while never putting all your financial eggs in one basket.

Interested in more tips for saving for your golden years? Stay tuned for other Master of Retirement tips, right here on our blog, and visit us on Facebook and Twitter for daily retirement insights brought to you by the IALC. Happy playing!

To work or not to work? That is the retirement planning question. Let’s take a closer look at this modern-day riff on the famous line in Shakespeare’s “Hamlet,” where Prince Hamlet laments about life’s unfairness but reflects that the alternative (not being alive) could be worse.

Lately, many analysts and journalists have written about the necessity of older workers continuing to work in their retirement years and the financial advantages of delaying the start of Social Security benefits and delaying drawing down retirement savings. When polled, increasing numbers of baby boomers are saying they plan to delay retirement. For example, a recent report from the Transmerica Center for Retirement Studies shows that almost two-thirds (65 percent) of workers plan to work after age 65 or don’t plan to retire ever.

In addition to surveys and reports, you may have also read glowing articles about people who work into their 70s and love it, such as the recent article in AARP The Magazine that cites statistics about the working-longer phenomenon and shows an inspiring picture of a happy older worker. Or you may have read that large numbers of older people are still physically able to work and that working longer is associated with an increased lifespan (though there’s no conclusive proof of causation).

So what’s not to like about the working-longer strategy?

A recent article posted on Slate put the kibosh on the idea, calling it “retirement porn” — a fantasy for many people. The article cites depressing statistics showing why it’s unrealistic for older people to continue working today due to a combination of health issues and age discrimination. It gives a few examples of blatant age discrimination against older workers, implying that this experience is the norm for older people seeking employment.

In addition, the oft-cited Retirement Confidence Survey from the Employee Benefit Research Institute reports that 49 percent of older workers left the workplace earlier than they had planned.

But wait! A recent report from Careerbuilder shows that 54 percent of employers hired mature workers in 2014, up from 48 percent in 2013, and that 57 percent of employers plan to do so in 2015. And the Transamerica study cited above reports that most employers have positive views of older workers, and that 88 percent of employers say they’re in support of employees working past age 65 and delaying retirement.

By now, you might be a bit bewildered about the reality of working in your retirement years, but that shouldn’t come as a surprise. The fact is, American society is in a transition phase as we try to figure out how to deal with the many older workers in the middle of a longevity revolution that’s more than doubled the average length of retirement since 1950, according to the Stanford Center on Longevity.

In order to successfully navigate this transition, we’ll need to negotiate some conflicting points of view:

• Some people will enjoy continuing to work and contributing to society in their older years, while others hate working and can’t wait to retire.
• Many retirees report they’re very happy, yet others say they’re bored and lonely.
• Many people are physically able to continue working into their 70s, while others have had physically demanding jobs or debilitating medical issues, which will prevent them from working into their later years.
• Most older workers don’t have the financial resources to generate a retirement income that’s similar to their preretirement income, yet many retirees report that they’re happy living on less income.

Fortunately, resolving these issues doesn’t have to come down to a “one size fits all” answer. Instead, we’ll have to embrace some ideas that might appear to be contradictory and are easier said than done. We’ll need to accommodate the need or desire of older workers to continue working and, at the same time, build financial resources to enable people to retire when they’re no longer able to work.

We’ll need to recognize that there are numerous solutions to the challenges of an aging society. Some people will want to retire completely from their primary job, others will want to continue working full-time at their primary career, and others will want to transition into part-time or bridge jobs, or embark on encore careers.

Back to the similarities to Hamlet’s eternal question. Yes, it might be unfair that many older people may need to work in their retirement years and that it might be hard for them to find work. But consider the alternative: The Stanford Center on Longevity says the average life expectancy in the U.S. increased by 30 years during the 20th century, an amazing accomplishment when you think about it.

So, we now have many, many more people today surviving to old age compared to 100 years ago. If not for this significant achievement, many of the older workers we’re wringing our hands over would be dead. That means we have a nice problem to work on, when you consider the alternative. Somehow, we’ll figure it out.

So much for the “golden years.”

Some 28% of recent retirees complain that life is actually worse in retirement than it was when they were working, according to a recent survey by Nationwide.

The cause may be mismatched expectations. Pre-retirees tend to overestimate two factors that will be important to their wellbeing, the survey suggested: their future retirement income and their future health.

When either (or both) of these wind up falling short, disappointment ensues. About a quarter of recent retirees say their Social Security payment is less than they expected. And an even larger group — one third — say health problems are interfering with their retirement.

Of those with health issues, the majority report their condition cropped up more than five years sooner than expected.

“Many people think their health will maintain where it is currently, and they are surprised when they start experiencing issues earlier than expected,” says Tina Ambrozy, president of Nationwide Financial Distributors. “It really affects their happiness in retirement.”

The survey of 1,012 U.S. adults ages 50 and older — both current and future retirees — was conducted by Harris Poll on behalf of the Nationwide Retirement Institute.

Medical appointments can devour considerable time and money, resources that many retirees would prefer to devote to fun activities. What’s more, health care costs tend to rise at a rate much higher than general inflation — while retirees receive only modest, inflation-based bumps in their annual Social Security payments.

This gap grows over time, leading to some alarming projections: An average 66-year-old couple retiring this year will require 59% of their Social Security benefits to cover their total health care costs in retirement, according to HealthView Services, a Danvers, Mass.-based company that provides retirement health care cost data and tools to financial advisors. A 55-year-old couple retiring at 66 will need 92% of their benefits, and a 45-year-old couple will need a frightening 122% of their Social Security benefits to cover their retirement health care needs.

Proper planning can help alleviate these funding shortfalls — and, one hopes, increase retirees’ happiness. Too many people still wing it when it comes to retirement finances. Experts advise beginning concrete preparations — estimating retirement expenses and income, for example, and considering when to claim Social Security — by the time you’re 50.

As it stands, Ambrozy says, “There’s a lot of guessing going on.”

Source: http://time.com/money/4946948/retirement-income-planning-health-disappointing/

Here’s the state of retirement saving in the U.S., and what to do if you need to catch up.

If you read the financial news often, you may have heard about the “retirement crisis” many Americans are facing. While it’s true that the average American doesn’t save nearly enough for retirement, the good news is that this is a fixable problem. Here are a few statistics to give you a true picture of retirement preparedness in America, as well as what you can do about it if you’ve fallen behind.

1. The average retirement savings for an American family is $95,776.

According to a report by the Economic Policy Institute (EPI), the average family has a retirement nest egg of $95,776. The average household close to retirement (ages 56-61) has $163,577 saved. And to be fair, this doesn’t include assets that could potentially be sold, like a house.

However, this data is frightening for a few reasons. For one thing, experts generally suggest that retirees can only withdraw 4% of their retirement assets in their first year or retirement, with inflation-based increases in subsequent years, without fear of running out of money. So, this average for pre-retirees only translates to about $6,500 in annual income. Here’s a good method to help you determine how much you should save for retirement if you want to maintain your standard of living after you retire.

Additionally, the median savings for this group is just $17,000. I’ll spare you the mathematical details, but when a median is a lot lower than the mean (or average), it implies that more people have less than the mean than more. And this is indeed the case. As my colleague, Brian Stoffel, pointed out in this article, 41% of households in the 55-64 age group have no retirement savings at all. Another 20% have less than $50,000. If you’re still relatively young, don’t let yourself become a member of this group. If you are in this group, now is the time to get serious about aggressively setting money aside.

2. The average monthly Social Security retirement benefit is $1,315.

Social Security is not designed to be a stand-alone retirement income stream. In fact, Social Security is intended to replace about 40% of the average retiree’s salary. Experts generally suggest that you’ll need about 80% of your pre-retirement salary to maintain the same standard of living after you retire, so the rest needs to come from other sources, or you need to be prepared to live significantly more cheaply than you’re used to.

Unfortunately, too many retirees choose the latter path. 48% of married couples and 71% of unmarried retirees rely on Social Security for more than half of their income, and 21% of couples and 43% of singles rely on Social Security for virtually all of theirs.

3. Healthcare alone will cost the average retired couple $260,000.

According to a report by Fidelity, the average 65-year-old couple retiring in 2016 can expect to spend a total of $260,000 on healthcare expenses alone throughout their retirement. The U.S. government-run www.Medicare.org projects that the average Medicare beneficiary will pay $7,620 out of pocket for their healthcare expenses this year, which is consistent with Fidelity’s findings, based on the average length of retirement. Well, if the average Social Security benefit is $1,315 per month, or $15,780 per year, this means that 48% of the average retiree’s Social Security income will be eaten up by healthcare costs. That leaves the average person just $8,160 in annual Social Security income for everything else.

4. Only 18% of American adults actively contribute to an IRA.

According to a TIAA survey, only one-third of American adults have an IRA, and just 18% actively contribute to their accounts to save for retirement. To be fair, many people have 401(k)s or other retirement plans at work, but even the average active 401(k) participant falls woefully short of what they should have saved for retirement.

I’m not too worried about the people who don’t contribute to an IRA because they’re happy with their current retirement plan. I am, however, concerned that 46% of people who don’t have an IRA say that simply don’t have money to invest, as well as the 25% who say they don’t know enough about IRAs to feel comfortable starting one. For one thing, you don’t need thousands of dollars to get started. In fact, many brokerages have no minimum initial deposit requirement for retirement accounts — you can literally get started with a dollar. Furthermore, IRA investing doesn’t need to be complicated. With a little primer on asset allocation and some knowledge of ETF investing, you don’t need to be an investing expert to start building the perfect retirement saving account for you.

5. The average tax deduction for IRA contributions is $4,885.

Let’s end on a high note. I’ve written before that the tax breaks associated with retirement saving are the best of all. Not only do you get to build a nest egg without having to worry about capital gains or dividend taxes each year, but you can also get a nice tax break now if you contribute to a pre-tax account such as a traditional IRA. It’s also important to mention that Roth IRAs have several benefits of their own, just not an immediate tax deduction.

One encouraging statistic is that the average traditional IRA contributor got a $4,885 tax deduction for their contributions in 2014, the latest tax year for which finalized data is available. Since the maximum annual IRA contribution is $5,500 ($6,500 for those 50 or older), this implies that most people who do contribute to an IRA max it out. If you’re in the 25% tax bracket, the average IRA deduction translates to $1,221 in tax savings per year just for saving for your own retirement. Seems like a no-brainer to me.

As a final thought, consider that if you’re 30 and start contributing the maximum of $5,500 per year to an IRA every year from here on out, you could retire at 65 with a $1.3 million nest egg, based on the stock market’s historical rate of return. And this would be on top of your Social Security and any pensions, 401(k) savings, or other retirement accounts you may have.

Balance Gained By Considering Alternative Financial Products Such As FIAs

Americans need to take additional steps in order to ensure a financially stable retirement – one that allows them to pay for medical bills and essential costs of living while enjoying their bucket list.

Our new data shows most Americans are at risk of an unstable retirement. In fact, only 9% are diversifying their portfolio which is essential to managing risk so that not all financial eggs are in one basket. A diversification strategy can ensure balance and provide retirement planning peace of mind.

That said, it can be hard to create diversity. What products will bring you closer to a financially secure retirement?

WATCH VIDEO “CLICK HERE”

Surprisingly, the study found 22% of Americans are not familiar with the most routinely used retirement products such as mutual funds, Certificate of Deposits (CDs), and Fixed Indexed Annuities (FIAs), that can create portfolio diversity.

Consider FIAs to help create a foundation of conservative growth and ensure a steady income during retirement. With both growth potential and principal protection, FIAs can be a complementary product within existing portfolios since they are not subject to the volatility of the stock market.

While FIAs are a secure way to create balance and get a steady income during retirement, there are misconceptions about it – watch the video to see the top myths busted and check out FIAFacts.org to learn more including the Top 20 Myths and other videos!

Not married? Here are strategies to help you maximize your Social Security benefits.

Key takeaways

✔ The longer you delay Social Security, the higher your monthly benefits.

✔ Divorced: Your benefit can be based on your ex-spouse’s work history.

✔ Widowed: Consider claiming survivor’s benefits or your own, and switch later.

✔ Consider all your income sources when making a decision on Social Security.

Figuring out when and how to take Social Security can be a complicated decision, even if you are single. Here are some strategies to consider to help make the most of your Social Security benefits if you’re widowed, divorced, or have never married.

First, some basics

You can start taking Social Security, receiving reduced benefits, when you reach age 62, rather than waiting until your full retirement age (FRA). FRA ranges from 65 to 67, depending on when you were born.  If you take benefits before you reach FRA, Social Security will reduce your monthly payments. If you delay collecting until you reach FRA, the amount of your monthly benefit will increase until you reach age 70.

Generally, the longer you delay taking Social Security, the higher your monthly benefits may be, and the gains from waiting can often be significant. Indeed, millions of Americans could help ensure a brighter financial future for themselves simply by hitting the pause button on Social Security for a few years.

Of course, if you wait to collect, you may not live long enough to enjoy the added value of increased payments. Because none of us knows when we will die, you need to make some reasonable assumptions about your life span, based on your health and family history. To help you estimate when you may break even, use the Social Security Administration Retirement Estimator Opens in a new window.

If you are single

Some people want to retire as soon as they can for health reasons. But if you don’t need to, consider what you may be giving up if you take Social Security at age 62. Taking benefits before your FRA can cost you now and in the future.

Consider the following hypothetical example. Colleen’s FRA is 66. If she starts taking benefits at age 62, she will get $1,500 a month. If she waits until she is 66 (her FRA) to collect, she will receive 33% more, or $2,000 a month. If she waits until age 70, her benefits will increase another 32%, to $2,640 a month.¹ And if she were to live to age 89, her lifetime benefits would be about $47,000, or 13%, greater than if she had waited until age 70 to collect benefits.² (Note: All figures are in today’s dollars and before tax; the actual benefit would be adjusted for inflation and would possibly be subject to income tax.)

But that is only part of the story. If you are working, you don’t have to live on your savings. And if you stop working full time and leave a job with good pay and benefits, it may be difficult to ever regain that level of compensation if you need to return to work later. Also, as you approach retirement, you’re often at the peak of your earnings and your ability to build retirement savings. Keep working and you can make “catch-up” contributions to tax-deferred workplace savings plans. Catch-up contributions enable you to set aside larger amounts of money for retirement. For example, the limit on pretax contributions to 401(k) plans is $18,000 in 2016-2017, but if you are age 50 or older, you can invest an additional $6,000 each year. Note: These amounts are subject to cost-of-living adjustments (COLAs).

If you are widowed

If you are a widow or a widower, you are eligible to collect your former spouse’s Social Security payments as a survivor benefit. Again, if you wait until FRA to take payments, you can receive 100% of that benefit—less if you collect before your FRA. (The rules for survivor benefits and regular Social Security benefits differ.  You can also take whichever payment is larger: a monthly check based on your own work history, or the survivor’s benefit.

Your choice doesn’t have to be permanent. There are two strategies worth considering:

Claim survivor’s benefit, then switch to your own. First, you can claim a survivor’s benefit, let the amount of your own Social Security payments grow, and then switch to claiming your benefits later. This may work best if you’re under age 70 (because your own payments will only increase until you’re 70) and have a relatively high benefit at FRA compared with that of your deceased spouse.

Consider this hypothetical example. Ann is 62 years old and is eligible to receive $1,050 if she were to claim Social Security this year. Her husband, John had begun receiving his monthly benefits of $1,500 at age 62, but he died this year at age 66. If Ann claims her benefits now before her FRA of 66, she would receive a survivor benefit of $1,215 per month –80% of John’s benefit –and an amount higher than her own benefit of $1,050. If you are a surviving spouse, Social Security automatically defaults to the higher amount—in this case, her survivor benefit. Alternatively, she can elect to receive survivor benefits to age 70, and then switch to her own benefits. By then her own benefits would have increased to $1,980 a month, a 76% increase in monthly benefits. Ann would earn more than $115,000 in extra payments if she lived to age 88, boosting her lifetime benefits by about 40%.² These rules are complex, however, and you should consider speaking with a Social Security representative.

Claim your own benefit now; switch to survivor’s later. Many retirees are surprised to learn that survivor benefits can increase after a spouse dies, but they do—until you reach FRA. This strategy may work best if you’re younger than full retirement age and you will have a low monthly benefit at FRA compared with that of your deceased spouse.

For example, Mary Ellen is 62 and is currently eligible for $563 a month in benefits and $750 a month at her FRA. Her husband, Patrick, started taking benefits at age 62, was getting $1,500 a month, and died this year at age 66. As in the previous example, if Mary Ellen claims benefits at 62 (before her FRA), she would receive $1,215 a month. If you are a surviving spouse, Social Security automatically defaults to the higher amount—your own or your survivor benefit. But if she chooses her own lower benefits of $563 for the first four years of her retirement, by the time she hits FRA, her survivor benefit will rise to $1,500 a month, a 23% increase. She could then switch to that higher amount, and increase her lifetime benefits by $25,000, or almost 9%, if she lives to age 88.²

Find your own strategy

Don’t think of Social Security as just a direct deposit once a month; it’s an inflation-protected component of your overall retirement income. Consequently, you should not determine your strategy for Social Security benefits in isolation—instead, you should strive to maximize your total retirement income. Delaying your benefits will boost your monthly payments and, potentially, your total income stream later on.

However, if you wait to age 70 to collect benefits and you are not working, you need to make sure your other sources of income, such as pensions, annuities, and investments, meet your expenses. If you don’t do so, delaying Social Security could leave you withdrawing from your other assets more quickly than you should, which could be a problem later in retirement. So, take a few minutes and project your future benefits, based on various scenarios, to help determine when it’s best to start taking Social Security. Doing so may help you maximize your benefits, which could contribute to your financial well-being in retirement.