This is probably the most important question that we have to ask people when they are inquiring about the best way to invest their retirement dollars today.There are lots of places to put your money- the market, the bank, real estate, bonds, etc. - but over the last decade or so we've seen ample proof that , although there can be great years with these various options, there can also be terrible years. Many people have lost so much of their net worth that retirement now is only a far-off dream. To put this in perspective, if you had $100,000 and it lost 20% in a Market correction your account would now be worth $80,000. But a 20% upturn would only bring you back to $96,000 (80,000 X 20% = 16,000). It gets worse the more the decline- a 30% decline would require a 43% increase (70,000 X 43 = 30,100) just to get your money back to even, and a 50% decline would take a 100% increase (50,000 X 100 = 50,000) to get back to where you were before!
Some have become so fearful that they have their money parked in places where there is virtually no possibility that their nest egg will ever grow enough to give them the lifestyle they thought they were going to have only a few short years ago. Others, despite the numbers we've just shown, are still holding on to the hope that somehow the market (stock or real estate) will give them back the gains they had experienced a few years ago. People are looking for a guaranteed income for life, they hear over and over "Don't outlive your money"! It is a scary time with all the turmoil in the world today and all we've been through economically and politically since the year 2000.
Surveys have shown that people's attitudes towards retirement planning have changed with all the uncertainty in the world today. Many people today fear outliving their money more than they fear dying! The most important features desired in the "Ideal" Financial Products today are:
The ability to support a stable, predictable retirement standard of living,
A guaranteed income stream for life,
A guarantee not to lose value gained,
Protection from market downside,
A product that they don't need to worry or think about what it is doing constantly.
Watch this short 4 minute video "Growth without Risk" highlighting these features:
Today people are more concerned about the safety of their retirement income than they are about high returns. Still, people are dissatisfied with the extremely low returns they are getting from their safe havens like CD's and Money Market or Savings Accounts. So what are you to do? Well there is a solution that can give you the peace of mind of knowing that your money can grow at a respectable rate without risk and can generate the income you need to retire without fear that you will run out of money- no matter how long your retirement lasts! People from different age groups have different concerns and expectations for protecting their money and accomplishing their goals. Let's take a look at some of these groups:
40-year olds to 60-year olds Although people in this age group generally are able to tolerate more risk than older generations there is still an aversion to losing money in the market again as happened in 2000-2002 and again in 2008, so that for most people this became the "lost decade" financially. Most advisors talk about diversification to protect against market risk. Wouldn't it be good knowing that a portion of your retirement money is growing at a decent rate without risk so that you could count on that for sure? For example, if you were 40 years old today and had $100,000 to put into a Fixed Index Annuity and wanted to know what it would be worth exactly 20 years later as Lifetime Income we could go to the Annuity Advantage Calculator and input the figures and we'd find out that a product that offers a 10% Bonus today and 8% Compound Interest yearly would make your $100,000 today worth exactly $512,705.29 thenas lifetime income that you could never outlive! For example, a 50 year old who started to draw income at age 70 would be receiving $30,762.32 a year for the rest of his life-based on a 6% annual payout! Any taxable alternative would have to grow at a rate of 11.53% each and every year for 20 years just to keep up! Wouldn't it make sense to put some of your eggs in this basket?
60-year olds to 70-year olds People in this age group do not have the luxury of time that those in the younger group have to recoup any possible losses of capital - they are, generally speaking, in the "Retirement Red Zone". So loss of any capital should not even be a consideration. Having your money in a product where it can continue growing at a minimum of 8% Compound Interest per year tax-deferred until you decide you want to turn on the income switch should help you sleep well at night! You decide when you want to start taking the income and paying taxes- why pay taxes on money you are not using?
70-year olds and older For those in this age group often times taxes and wealth transfer are the greatest concerns, along with concerns about running out of money in their own lifetime. As we've already discussed, a Fixed Index Annuity with an Income Rider will guarantee you never run our of money. But in addition to that it could also reduce your tax burden in two ways. First of all, why pay taxes on money you are not using?- with an Annuity you only pay taxes on the growth when you actually use the money. Secondly, for those who pay taxes on their Social Security benefits because their Provisional Income is too high, why not lower that Income by putting some of that money that they are not intending to use into an Annuity where it can continue to grow tax-deferred? (Click on the page "Annuities vs. CDs" on the left for more details). Finally, click on the tab "Passing on Wealth- the Stretch IRA" to see how a Fixed Index Annuity can work to maximize the amount of money you can pass on to your children and grandchildren.