AIG has put all the financial worksheets into one documents, this helps insurance applicants to explain to the underwriters why they need the coverage amounts, because one frustrating fact for some insurance applicants is being declined for their applications.
The spreadsheet from AIG below has many different worksheets to help either individuals or businesses to determine the appropriate life insurance needs.
David Littell is a Professor Emeritus at the American College of Financial Services, where he co-created the Retirement Income Certified Professional® designation. In other words, he’s a pro at one of the most complex tasks retirees face: turning a lump sum of savings into a reliable income stream that will last for life. And as he approached retirement himself, Littell discovered some key differences between what the textbooks say and the way things play out in real life.
Here’s what Littell has learned by finally living what he’s taught all these years:
Start with Something
Financial advisors love to ask their clients detailed questions about their future plans: When are you going to retire? Will you work in retirement? If so, how much?
In reality, “it’s hard to nail that down until you’re close to it,” Littell says. “I’ve changed my plans four or five times.”
For starters, you don’t know how your health will hold up. Some 43% of workers retire earlier than planned, and of those 35% stop working due to a health problem or disability, according to the Employee Benefit Research Institute.
Also, while you’re still working full-time, you’re probably not looking for a part-time job to supplement your retirement income. So you don’t know how feasible it is to get the kind of part-time work you want, or how much you might earn once you find it. Alternatively, if you’d rather continue working for your former employer on a part-time or consulting basis, you won’t likely broach the topic with them until you’ve given your notice. All this means that it’s hard to have real numbers to plug into retirement income calculations in advance.
Yet that doesn’t mean you shouldn’t try, Littell says. There’s a good reason advisors ask all these questions, to try to make accurate projections of your retirement income. It’s helpful to know how much you’ll have coming in, to make sure it’s enough to meet your needs. (To ballpark those needs, Littell suggests a simple method: use your most recent paycheck as a proxy for the retirement income you’ll need each month — assuming, of course, that you live within your means and aren’t racking up credit card debt to fund your lifestyle.)
So go ahead and make some assumptions, and do your calculations based on those. But understand that estimates are just that, and are subject to change. Revisit your plan regularly, and make sure the numbers are going to work before you give up your full-time gig. “People should think really carefully before they leave full-time work,” Littell says. Many people get tired of the grind and let their emotions govern the decision of when to quit, he says. But if you leave the workforce and then regret your decision, it’s very hard to re-enter at the same salary with the same benefits.
For his part, Littell recently cut back to working three days a week and plans to further reduce his hours as he shifts to a consulting role early next year.
Listen to Your Gut
Littell’s father lived to age 104. Aware he might have similar longevity, Littell didn’t want to risk outliving his savings. So he bought several annuities, insurance products that turn your lump sum into guaranteed income for life.
Financial advisors commonly recommend that clients use annuities to cover their essential spending. This way, all of your necessary needs will be covered by a “floor” of guaranteed income, and you can use your 401(k) or IRA withdrawals for discretionary fun. The logic behind this strategy is that, if stocks take a dive, you can always curtail your travel plans, but you can’t suddenly stop paying your mortgage or your Medicare premiums.
To determine your essential spending, you would tally up what you pay for housing, health care, food, and other necessary categories. Then, you calculate how much of the total would be covered by Social Security and any pensions you might have. An annuity or annuities would be used to cover any shortfall.
But Littell didn’t go through this exercise. Instead, bought annuities with the percentage of his portfolio that he felt comfortable parting with about 25% of the total. Many consumers balk at annuities because they reduce your liquidity. Littell was willing to give up control over a quarter of his portfolio in return for guaranteed income, and staying within that comfort zone — rather than imposing textbook calculations — helped him execute that strategy. “The intellectual and the reality didn’t match very well,” he says. “The reality for me was, how much are you willing to give up?”
He’s deferring claiming Social Security until age 70, and he estimates that once he reaches that age, about 75% of his essential and discretionary needs will be covered by guaranteed income. The annuities will help him sleep at night and not fret about outliving his savings. “I have no intention of worrying about that,” Littell says.
Q. I just bought a life insurance policy, how do I review it a few years later/
A. You can review your life insurance policy, especially if it is a permanent life insurance policy, from the following 3 perspectives -
From Financial Strategy Perspective
From Coverage Perspective
From Protection Perspective
In last blogpost, we discussed riders and convertibility of a life insurance product, now we will discuss the last consideration.
How to Buy Life Insurance
There are a number of outlets for term life insurance where you can buy online and many people do. However, it may make sense to buy your policy from an experienced financial professional. Yes, those selling insurance usually get paid on commission. But the policies they offer are, in many cases, the same as the ones you will find online, so typically you won’t pay more for going through an agent.
And there can be some advantages. First, a financial professional can help you determine how much coverage you really need, and that may be the most important buying decision you make. Many people try to make an educated guess. And many companies offer online calculators to help gauge approximate needs.
But actual life circumstances and financial needs vary from individual to individual and can call for more refined and established methods of determining what type of insurance and how much coverage is needed. Financial professionals can help you make that determination.
In addition, an experienced life insurance agent can also recommend a policy that is the best fit for you based on your age and financial goals. They also know the companies and policies they sell, and can answer all your questions. They can shop for the best rates and help you through the underwriting process.
Buying life insurance is an important financial decision. That’s why it is important to get the right amount and type of coverage to protect the financial security of the people that depend upon you every day.
In our last blogpost, we discussed the types of life insurance products, now second consideration.
Riders and Convertibility Considerations
Beyond basic price are other factors to consider when shopping for a policy. For instance, there are some additional benefits, often referred to as “riders,” that you may want to add to your policy.
One is the disability waiver premium rider. This benefit waives your premium and keeps your life insurance in force if you were to become disabled and were unable to work. Look closely at this rider when shopping, because some companies offer very competitive basic policy rates, but their rates for benefits like waiver may not be that competitive.
Another feature that you may want to consider is buying a term policy with an option to convert the coverage to permanent life insurance at a later date. Many policies offer some type of conversion option. But you should consider which permanent policies you can convert to and how many years you have to decide if you want to convert. Some companies limit the policies you can convert to and exclude their most competitive products, or they have very short conversion periods.
Convertibility is important for a couple of reasons. First, term life insurance only provides coverage for a limited period of time. Your coverage may run out when you still need life insurance. When that happens, you may decide to get a new term insurance policy. But you will be older, so your premiums will be higher.
In addition, if you have developed any health issues, you may not be able to get coverage at an affordable price. Converting some or all of your term life insurance to permanent coverage can help ensure that you have coverage that you can keep for as long as you need it. In fact, it may make sense for you to buy some permanent life insurance while you are young, just because it is far more expensive when you get older.
Another reason that a conversion option is important is if you were to become disabled. If you are permanently disabled and you have waiver of premium on your policy, you can convert your term life policy to permanent coverage, and with many companies the premium for the permanent coverage will be waived.
Another thing to consider is the quality of the company you are buying your policy from. Reliable life insurance companies are generally rated on financial strength by several ratings agencies. These include A.M Best, Moody’s Investors Services, Fitch Ratings, and Standard & Poor’s. Financial strength ratings are a key indicator of a company’s ability to meet its financial obligations. Look for a company that has solid ratings.
You might also consider how policyowners (and beneficiaries) rate their service. Many good companies have some type of customer service ratings or awards.
In our next blogpost, we will discuss how to buy life insurance.
September is life insurance awareness month, we will use three blog posts to explain 3 considerations when shopping for life insurance products.
Determine What Types of Life Insurance Do You Need
To make an informed decision, you must first educate yourself on the various types of life insurance products available.
Term life insurance, which provides death benefit protection for a limited number of years (terms), offers the lowest premiums. That’s why most young people start off buying it.
The most popular policy types are 10- and 20-year term life insurance. But 5 to 40-year terms are available. These policies offer guaranteed level premiums. The longer the coverage period, the higher your premium will be. This is because insurance costs increase as you age. The insurance company calculates a level premium that will cover all the costs over the term period.
There is also an annually renewable term (ART) policy, where the premium covers one year of coverage at a time. These generally start out with a lower premium than level term, but become more expensive after only a few years. In general, ART only makes sense if you are only going to need coverage for a short period of time.
Permanent life insurance, generally whole life insurance and universal life insurance, offering a guaranteed death benefit for life, not just a defined number of years. In addition, permanent life insurance policies can also build cash value and, in some cases, the opportunity to earn dividends, which are not guaranteed.
As a general rule, a term life insurance policy offers the most basic coverage at the most affordable price for many people. Indeed, term insurance is usually quite affordable for those who are young and in relatively good health and is the kind of policy most people start out with. For this reason, the term life insurance market is very competitive.
This leads to some pricing tactics shoppers should be aware of. For example, some companies offer very low premiums for “super” preferred applicants, but only a small percentage of applicants actually qualify for that rate. So you may apply for their best rate, go through a medical exam, and a month later the insurance company offers you coverage, but at a higher premium rate.
In next blog post, we will explain Riders and Convertibility.
American National's Signature Term Life product is great for NY for its affordability, conversion feature, and living benefits riders that no other carriers' term life products can match!
Below is an article from American National about how to use its Signature GUL product for collect education planning.
There are many ways to cover the cost of a college education. The cost of a college education has gone up to the point that it is difficult to pay for and college loans follow the graduate for the remainder of their lives due to the interest on the loan and the long repayment schedules.
Many individuals point out that 529 Education plans are the way to fund college education. If the money is used for qualified education purposes it can grow tax-free and be removed from the plan tax-free. However, if the money is not used for qualified college education costs, the growth of the money becomes taxable and subject to penalties when withdrawn. Also, typically the money is conservatively invested for lower growth and safety but is still subject to market downturns. The plan is not self-completing in the event a parent or grandparent funding the plan dies. 529 Plans have funding limits subject to annual gifts (five years at a time). Lastly, 529 plans only serve one purpose and that is college funding.
Funding College Education with Life Insurance
An advantage of life insurance not enjoyed by any other funding vehicle is that the plan is self-completing if anything happens to the individual funding the policy. If someone dies, they will know they have fully funded the education obligation. Any other savings vehicle may suffer a shortfall if the individual funding the education plan dies before funding is completed. Cash Value in a permanent life insurance policy is not currently a countable asset when applying for FAFSA financial aid.
Signature Guaranteed Universal Life
Signature GUL has unique features that can make this a match for saving for college education. The death benefit is guaranteed if premiums are paid and no loans are taken so that if a premature death occurs the death benefit will be there to help cover the cost of college education needs. Signature GUL also has the Guaranteed Cash-Out option that allows a partial return of premium after 15 years and a full return of premium after 20 and 25 years, up to the Cash-Out benefit maximum. Depending upon the timing, the policy can be turned in for a return of premium and the premiums can be used to fund college education. In the meantime, the individual funding the policy has guaranteed protection to self-complete the education funding needs and cover other needs as well.
Darrell and Christine, age 35, felt they needed life insurance protection for Christine and their two young children in the event something happened to Darrell, who was the primary means of support.
The couple also wanted to have the option to help their children pay for their education. They talked to their Financial Advisor and determined a $500,000 Signature GUL policy could help cover several of the risks faced by their family.
In the event that something were to happen to Darrell, they would have protection for the family that could cover education costs for the children, pay off the family home, provide Christine funds to run the home, and provide some funds to put away for her retirement.
Then, the Financial Advisor showed them that the Cash-Out Rider included on the Signature GUL policy would allow them to surrender the policy in exchange for a partial return of premiums at the 15th anniversary or a full return of premiums paid at the 20th, or 25th anniversary1. If the family found they no longer required insurance on Darrell, the premiums paid over the years could be paid out and re-purposed to help pay for their children’s education or student loan repayments.
Lastly, their advisor added that the policy also included Accelerated Benefit Riders for Critical, Chronic, and Terminal illnesses2. In the event that Darrell was diagnosed with a qualifying illness, he may be able to accelerate all or part of the death benefit and receive an unrestricted cash benefit giving Darrell and Christine the option to assist with their children’s education even in the event that Darrell suffered an illness that made him unable to work.
American National's Guaranteed Universal Life (GUL) provides guaranteed lifetime Death Benefit protection and three guaranteed periods that allow the insured to cash-out their policy.
GUARANTEED DEATH BENEFIT
You can determine the face amount and guarantee length between ages 95 to 121. The Death Benefit is guaranteed to the chosen age, assuming all premiums are paid as scheduled.
GUARANTEED CASH-OUT RIDER
During a 60 day period following the 15th, 20th, and 25th policy anniversaries, the rider allows for surrender of policy in exchange for a partial or full return of premiums paid. Added to the policy for no additional premium for issue ages 18-70.
If you are interested, please contact us to run GUL quotes for you.
First, What Is DIA?
Is your mindset turning toward how to safeguard your retirement standard of living for many years ahead? A deferred income annuity (DIA) provides protected lifetime income in the future. While the income stream can be started as soon as 13 months after purchase, it also can be delayed for a long time (40 years in some cases).
Bottom line: The longer the deferral period, the larger the income payout amount.
Next, What is QLAC?
A qualified longevity annuity contract (QLAC) is a special type of DIA and it brings added advantages. It allows traditional IRA owners and defined contribution plan participants to ignore the QLAC funds in those accounts when calculating their RMDs. As long as the QLAC distributions are delayed, the associated Required Minimum Distributions (RMDs) and taxes are too.
2 Reasons why a QLAC stands out for modern retirements include:
Below is a case study about Term Life Conversion from American National for people with term life but are interested in converting to permanent coverage in the future -
Converting from a term to a permanent policy is quite simple. The only paperwork that is required is a policy change application, USA PATRIOT Act Form, a signed illustration (or illustration acknowledgement), and a supplemental application. The beauty of a conversion is that if there is no increase in the face amount, the applicant does not go through additional underwriting and will not need to prove additional insurability! See the Term Conversion Guide for complete details.
One of American National’s agents, Charles, was kind enough to share his experience with the conversion process at American National. Charles recently had a thirty-year-old client that was recently widowed and raising two small children on her own. She knew the importance of life insurance and wanted to make sure that her parents would have the means to take care of her children if anything were to happen to her. After spending several years as a stay-at-home mom, she was just reentering the workforce. She was working hard to make ends meet, and she scrutinized every dime she spent. However, she knew the peace of mind that obtaining life insurance would give her was worth every penny.
After completing a needs analysis and discussing the difference in premiums between American National’s 20-year level Signature Term and multiple permanent products, the client decided that the term policy was all she could afford right now. She was a little concerned because she wanted to make sure she would not be a burden to her family if she were to pass away in 21-years; however, she was relieved to know she temporarily (for 20-years) had a solution in place to protect her family.
Charles eased her concerns even more when he told her about the conversion opportunities that were available at American National. He let her know that she was making a smart decision to get coverage while she was young and in great health and told her she would have the option to convert to any permanent plan over the next twenty years! Charles also informed her that the conversion options would allow her to change her term policy to a permanent policy without having to go through any more underwriting. He advised her the process was quick and easy and would allow her to get the new policy at the same rate class as her original term policy. He also let her know that if she was able to convert in the next five years, she would even get a premium credit towards her permanent policy! She was so grateful that the term policy with American National would provide the coverage she needed NOW along with the flexibility to get what she really wanted later.
Charles checked in with his client every 6 months to make sure she did not have any additional needs and to review her statements. While meeting with her to review her third annual statement, she mentioned that within the last year she got a huge promotion at work, bought her dream starter home, and was doing better than ever! Happy to hear that she had made huge financial strides in her life, Charles reminded her of the conversion options that she had available on her term policy. Next thing you know, she converted her term policy to the Signature Guaranteed Universal Life, and she now has guaranteed coverage (at a guaranteed premium) until she is 121 years old!
How about getting a protection...for now and in the future? Below is an idea from American General by using a combination of Term Life and GUL to accomplish this goal.
With Protective's blended solution, you can be prepared with protection against the unexpected — chronic illness coverage while you're living and death benefit protection when you're gone.
Protective Indexed ChoiceSM UL + ExtendCareSM: A blended strategy for keeping life on track when a chronic illness arises.
Flexible premium. May include a first year interest rate enhancement. 10% surrender charge free withdrawals each contract year. 7 year surrender period.
PRINCIPAL GUARANTEE FEATURE
The Minimum Guaranteed Surrender Value is return of premiums paid less any cumulative withdrawals.
INTEREST RATE ENHANCEMENT
American National may offer an interest rate enhancement on all premium payments received in the first 36 months of the contract for one year. This enhancement is not guaranteed and is subject to change.
INTEREST RATE GUARANTEE
The declared annual effective interest rate for the initial premium and each subsequent premium payment will be guaranteed for two years from the date the premium payment is received. After two years, the interest rate is declared annually.
MINIMUM GUARANTEED INTEREST RATE:
NAIC Index. See rate sheet for current rate.
60 days for 1035 Exchanges, CD Rollovers, Mutual Fund Transfers and Institutional Transfers
SURRENDER CHARGE SCHEDULE:
Year 1 2 3 4 5 6 7 8+
% 7 7 7 6 5 4 2 0
SURRENDER CHARGE FREE WITHDRAWALS
10% of annuity value as of the beginning of each contract year, including first year
SURRENDER CHARGE WAIVERS*
It’s more important than ever to find ways to help protect yourself and your family against market fluctuations in retirement. Here are a few suggestions…
Avoid a lose-lose situation in the marketplace
Many retirement planners suggest you’ll need 75 percent to 85 percent of your pre-retirement income to live comfortably in retirement. So whether you’re looking simply for money to pay your monthly bills or finance your way through a long-deferred bucket list, you’re going to need income — regardless of the market’s performance.
Unfortunately, taking money from an equity-based retirement account (such as a 401(k) or IRA) during an economic downturn can have a big impact on the future value of your account and the income from it. You’ll compound your losses by reducing the amount of income you have available during retirement, as well as the amount of money you can leave as a legacy to your family.
Find alternate sources of retirement income
Of course, the easiest way to avoid compounding your losses is to avoid withdrawing income from your retirement account when the stock market is in decline. And yet you have to find another source of retirement income from somewhere — ideally one that isn’t impacted by market volatility.
Your options include certificates of deposit (CDs), fixed annuities, and other conservative savings vehicles. Compared to equities, these assets may offer lower overall returns over the long run. But, they represent a stable source of financial growth — and that stability is key to your financial future.
There’s another option to consider: a whole life insurance policy.
Draw income from a whole life policy — tax-free
A whole life insurance policy gives you the pre-retirement protection you need now and guaranteed policy cash values for potential supplemental income later if needed. In addition, a participating policy has potential to earn dividends, which would increase both the protection and cash value. Dividends, however, are not guaranteed.
Plus, the cash value of a whole life policy is unaffected by short-term market volatility. That means it could provide an alternative source of income during years when markets are down and taking money from your equity-based retirement accounts isn’t a wise idea.
It’s important to remember there are implications to borrowing cash value or taking partial surrenders. These actions will reduce the policy’s cash value and death benefit. This could also increase the chance the policy will lapse, and it may result in a tax liability if the policy terminates before the death of the insured.
The wisdom of tapping into a whole life insurance policy for income in retirement will vary depending on individual circumstances. Many people seek out a financial professional for advice before making such a move.
Protect your family finances now and later
Of course, there are considerations to take into account for life insurance beyond retirement funds.
Purchasing life insurance is one of the most important decisions you can make. So make sure to consider an option that provides both flexibility and stability. Choosing a term policy may be an affordable option, but it is also important to think about how long you may actually need the coverage and the additional value a whole life policy provides. One thing that separates a whole life insurance policy from a term policy is how it protects your family both today and for your lifetime.
Even when you retire and stop receiving a traditional paycheck, you may still have income to protect. The benefits you receive from Social Security and income from many pensions may stop or be reduced when you pass away. This can significantly decrease the amount of money your spouse has to live on. The death benefit from a whole life policy can help him or her supplement some of that lost money and income, pay off the mortgage or reduce some other major expense.
Retire the old way of thinking about retirement
Today, many people are realizing the traditional ways of funding their retirement aren’t as reliable as they used to be. Between the volatility of the stock markets, the insecurities around Social Security, and the dwindling number of employer-provided pension plans, it’s clear that you may need stable options, such as whole life insurance, to supplement your retirement income.
Q. I had testicular cancer, will my life insurance application be declined?
A. No, the answer is it depends.
About Testicular Cancer
Testicular cancer is the most common form of cancer in young men ages 15-35, and the incidence of occurrence has been increasing. The good news, though, is that mortality rates are improving, due to dramatic improvements in treatment.
Underwriting Life Insurance for Testicular Cancer
Underwriting this form of cancer is a bit more aggressive than a lot of the other types of cancer, and is largely dependent on the Staging of the cancer from the post-operative pathology report. Stage I, is typically when the cancer is confined to the testes; Stage II indicates metastasis to local lymph nodes; and Stage III occurs with metastasis to remote lymph nodes or other organs.
The primary questions to be asked of a proposed insured that presents with this history are:
The good news is that with an In-Situ or Stage I cancer, we can typically get an offer shortly after treatment is completed with a low table rating and/or short term flat extra. Most often, we’ll be looking at Standard rates, once someone has reached 5 to 7 years with no reoccurrence.
Please contact us if you are considering life insurance but have special situations.
In last blogpost, we discussed how does DIA work, now we will discuss how to determine if DIA is right for you.
Does DIA Make Sense For You?
These DIA products tend to be most beneficial for pre-retirees between the ages of 55 and 65 who are planning to retire in 5 to 10 years. In addition to reducing market and longevity risk—an advantage of all fixed annuities—DIAs have the following advantages over immediate annuities:
If you are interested in DIA or other annuity products, please contact us.
In last blogpost, we showed you a case study how DIA could be combined with 401k to create secure retirement income. Now we will explain how DIA works.
How Does DIA Work?
Income annuities are different from other investment options because they offer longevity risk pooling (referred to as mortality credits). Effectively, assets from annuitants with shorter life spans remain in “the mortality pool” to support the payouts collected by those annuitants with longer life spans. Put simply, the longer you live, the more money you will receive. This is why it is so challenging for an individual investor to replicate this income stream.
DIAs are able to leverage the mortality credits and turn a portion of your savings into a stream of income beginning anywhere between 2 and 40 years that will last over your lifetime. By investing in a DIA you are starting the planning process ahead of your retirement age. In return for investing early, you are potentially securing a higher income amount than if you waited and invested in an immediate income annuity.
Why Guarantee Your Income?
Guaranteed income products serve a very particular purpose. They can shift some key retirement risks--longevity and market risk—off your shoulders and onto the issuing insurance company.
When you buy a DIA, you shift the risk of outliving your income to the insurer, who promises to pay you a certain amount of income for either a predetermined period of time or the rest of your life. The insurer also assumes the interest and market risk associated with your DIA investment; even if the market and interest rates are down significantly during your deferral period, you still get the same guaranteed rate of income.
However, DIAs, like any investment product, aren't right for everyone. There is an element of trading growth potential for a guaranteed future lifetime income stream. Part of that trade-off is giving up some flexibility (access), which is why it’s better to allocate a portion, rather than all, of your savings to a DIA. The amount you commit to a DIA is irrevocable, but the tradeoff is being confident that your income will be there when you need it.
In our next blogpost, we will discuss how to determine if DIA is right for you.
In last blogpost, we showed you what is DIA and its advantages. Now we will use a case study to show its value.
Consider a hypothetical example of how a DIA might work under different market conditions.
Imagine a 60-year-old couple with a hypothetical retirement portfolio of $500,000 who wants to generate income starting at age 65. The example below illustrates 2 different ways of creating income:
The couple decides to invest their $500,000 in a balanced target asset mix (TAM) (50% stock/40% bonds/10% short term), then starts taking income at age 65. The plan is to use only a Systematic Withdrawal Plan (SWP) with an initial 4% annual withdrawal rate and payments increasing 2.5% on each payment anniversary thereafter.
The couple decides to diversify and splits the $500,000 as follows: (1) $250,000 is invested in a balanced TAM for 5 years; then, at age 65, income is taken using a SWP with an initial 4% annual withdrawal rate and payments increasing 2.5% on each payment anniversary thereafter; and (2) $250,000 is used to invest in a joint life deferred income annuity contract with a cash refund and Consumer Price Index (CPI) cost-of-living adjustment (COLA), with payments starting at age 65.
As you can see, assuming average historical returns for the balanced TAM, the portfolio with the guaranteed income generated first-year monthly income that is $248 less than that generated from the portfolio without the guaranteed income. Because deferred income annuities are not exposed to market volatility, the income amount remains consistent regardless of a market downturn. Therefore, when historically low returns are assumed in the example, the portfolio with the guaranteed income outperformed the portfolio without the guaranteed income—generating first-year monthly income that is $361 higher.
One of the strongest reasons to buy a DIA is the foundation it provides for your retirement income plan. You establish a guaranteed level of income no matter what happens over the next several years, and are one step removed from the anxiety of watching the markets move every day with your retirement in sight.
Another consideration with deferred income annuities is the ability to invest incrementally over time by making additional payments. While most income annuities only allow a single investment, DIAs allow you to make additional investments to the annuity before your income payments—each additional investment subject to the interest rates available at the time of purchase—so you can increase your retirement income stream. By building your income plan in increments, you can stagger your investments with a range of interest rates and possibly take advantage of higher interest rates.
In next blogpost, we will discuss how does DIA work.
With pensions increasingly a thing of the past, most Americans now need to build their own streams of income for a retirement that could last decades. The success of your individual retirement income plan will rely on 2 key factors:
The Solution - Deferred Income Annuity (DIA)
That's where guaranteed income annuities may be able to help. These products are able to deliver a stream of income that you can rely on for either a predetermined period of time, or for the rest of your life. And, specifically, deferred income annuities (DIAs) let you lock in a stream of guaranteed income years before retirement, while reducing the effect of market volatility on your retirement income plan.
The Advantages of a DIA
The advantage of a DIA is that it offers a degree of certainty.
You can secure a portion of your retirement income years before entering retirement so you don't have to wait until the moment you retire to know what your investment will deliver in income. You can gain peace of mind and some flexibility with your other assets.
For some, using a portion of retirement assets to lock in guaranteed income for the first several years of retirement is an attractive option; knowing the income is secure, some investors may have the confidence to invest part of their retirement assets more aggressively during those early years.
While DIAs are an efficient way to generate income, keep in mind that you are giving up access to the assets you dedicate to this solution and the opportunity for potential market performance.
In next blogpost, we will show you a case study how DIA combined with your 401k investment could provide secure retirement income.
A single premium tax deferred fix annuity is a good option for retirees seek fixed income.
American Pathway SolutionsMYG offers:
Please see the product flyer below for more details:
Saving and paying for college can be a challenging goal and you may be among the many people who worry about the financial pressure that funding higher education can bring. Thankfully for parents and grandparents, it's never too early to start saving and there are many options to help you prepare for one of the most important milestones in the lives of your children or grandchildren.
A common option used for paying for college and educational expenses is a 529 plan, which is an education savings plan sponsored by a state or state agency. A 529 plan can be purchased not only by parents, but also grandparents and other relatives. When you purchase a 529 plan, your earnings grow tax-deferred and any qualified withdrawals are tax-free. As a child reaches college age, he or she can use the accumulated funds to pay for qualified expenses including tuition, room and board, books and computer equipment. While 529 plans have many advantages and can be useful in preparing for the future, there are limitations to consider as well.
Limitations of 529 plans include:
Plus, if your child receives a scholarship, you will likely only need a portion of the money saved in your 529 plan. If you end up with remaining funds or if a child decides not to enroll in school, the beneficiary can be changed to another family member. However, if you do not have other family members looking to attend, you may have to pay significant penalties to withdraw your savings for other purposes, depending on the rules of your state's 529 plan.
Using an annuity
One tool to consider as part of an overall college saving strategy is a fixed or fixed indexed annuity. A significant benefit of these products is your account value can grow tax-deferred and is protected from downside market risk. So when the market is up, your money can grow, but when the market is down, you do not lose any of your hard-earned savings. Plus, if your child receives a scholarship or decides to pursue another path besides college, the money in your annuity can be accessed for other purposes.
Keep in mind that annuities are designed to help you reach long-term savings goals. While most annuities allow you to withdraw a certain amount each year without penalty, you'll likely pay charges on withdrawals over that amount during the annuity's withdrawal charge period. This period typically ranges from five to 10 years or more, depending on the annuity.
Helping pay tuition
As with many financial plans, there is no time like the present to begin saving. An annuity purchased when your children are young can assist with tuition costs down the road. One option would be to purchase an annuity with a withdrawal charge period that coincides with the length of time it takes for your child to reach college age. For example, if on your child's 8th birthday you purchase an annuity with a surrender charge period that ends in 10 years; your child will be 18 and entering college. At this time, you'll be outside the withdrawal charge period, meaning you'll have full access to the annuity's value to supplement tuition payments.
It's important to remember that withdrawals from an annuity may be subject to state and federal income tax. In most cases, withdrawals taken before age 59½ will also be subject to a 10 percent IRS penalty.
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