Three Sources of Senior Citizen Retirement Income
Do you want to be a dependent senior citizen? You likely are according to this conclusion by the Economic Policy Institute, “For the typical person approaching retirement, the value of expected future Social Security retirement benefits represents the largest single source of wealth.” While this may be true, it’s a situation you don’t want to be in–dependent on the government and its political whims to determine your level of senior citizen retirement income. The more you can control and rely on your other sources of retirement income, the more independent you will be. Let’s discuss the ways in which you become independent with respect to your senior citizen retirement income. If you have a home, use a reverse mortgage when you need it. Most seniors are simply ignorant about how reverse mortgages work and then act out of ignorance. The other option is to find out how they work. A revrse mortgage simply allows you to tap the equity in your home as an income source. Right now, your home equity earns nothing, 0%. Would you keep money in the bank at 0%? Of course, when you die with a reverse mortgage, the equity in your home will be reduced [...]
Categories: charitable gift annuity, immediate annuities, retirement income Tags: senior citizen retirement income
Should You Annuitize your Insurance Annuity?
What does it mean? Put simply, to annuitize is to start taking payments from an insurance annuity that may have been accumulating for some time. Specifically, you “trade” the accumulated annuity balance for a stream of payments over a specific term of years or life (a life annuity). An annuity, a policy that is paid into either by lump some or regular payments by the policyholder, and gains value via investment of those funds by the insurance company that holds the policy, in a manner agreed between the two parties, has many terms attached when it is created, and there may be an option to annuitize at a certain point or date set at the start of the insurance annuity agreement. What happens when I annuitize? When, and how, the policy becomes annuitized is determined by the rules and terms that are agreed by the policyholder with the insurance company, and these can be varied and dependent on many different factors. If the policy has a number of different options at which annuitization can take place, then it is up to the policyholder to decide what is best for him or her. In many cases, if the insurance company does not hear [...]
Categories: annuitization, insurance annuity Tags: annuitization, annuitize, insurance annuity, life annuity
How to Make the Most of a Maturing Equity Indexed Annuity
Did you invest in an equity indexed annuity a few years back? If you bought it seven years ago, the maturity date may be approaching fast, and you might only have a small window of time to decide whether to renew the annuity or place your money elsewhere. If you look at what has happened to annuity rates and the markets since you bought your equity indexed annuity, you may understand why the specifications for a new contract might differ. Interest rates are at a four-decade low, and the markets have swung wildly. Therefore, there’s a good chance that you will see lower market participation rates and lower maximums (caps) on amounts credited to your equity indexed annuity. In addition, you may have to make a longer-term commitment on your new contract. The company might now have the ability to change participation and cap rates on the annual anniversary dates, whereas, your original contract may have kept the same numbers throughout the term. However, this could work in your favor. Because if the equity markets become less volatile, there’s the chance that index option premiums will decrease, thus allowing annuity companies to offer higher annual participation levels and caps. Times have [...]
Categories: 1035 exchange, equity indexed annuity Tags: equity indexed annuity, surrender charge
Annuities Require Careful Tax Planning
One popular benefit of a fixed annuity is that you can let the interest in the account compound each year without paying income taxes. This allows your money to possibly grow faster as compared to fully taxable investments that pay similar, before-tax returns. When you start making withdrawals, the percentage of income that is taxable depends on how you structure the distributions. Your beneficiaries, however, may not have that flexibility, and could face a big annuity tax bill on the inheritance. Assuming your annuity is not held in a tax-qualified account, such as an IRA, your heirs will have to pay income tax on the built-up earnings when you die. Suppose that you put $250,000 into a fixed annuity a number of years ago, and now it is worth $450,000. If you died today, your beneficiaries would receive the $450,000, and would have to pay as much $70,000 in federal income taxes on the accumulated profit (maximum federal income tax rates are currently 35%). To help your heirs keep the money you earned, you may want to consider purchasing a life insurance policy for the amount of the estimated tax bill. You could pay the premiums yourself, ask your beneficiaries [...]
Categories: annuity taxation, annuity taxes Tags: annuities, tax planning
Fixed Immediate Annuity Can Eliminate the Required Minimum Distribution Calculation
Do you own an IRA, hold a Keogh, or still have assets in a qualified retirement plan that was offered by a previous employer? Then perhaps now you have to think about the best way to withdraw the funds, as the IRS requires at age 70½, while making sure that you don’t outlive your income. One choice is to remove the money all at once and pay the tax. That step, however, may put you in a higher tax bracket is is usually not wise. Another option is to go along with the government’s guidelines and calculate the Required Minimum Distribution that you must withdraw each year after you turn 70½. But what if there was a way to not have to do those calculations and also not worry about tax law changes and market fluctuations that could affect retirement accounts every year? A tax-qualified, fixed immediate annuity will spread the tax liability over your projected lifetime and automatically satisfies the IRS requirements, so you will never have to calculate the required minimum distribution. A check will arrive every month, or whichever schedule you select, for the rest of your life—no matter how many years that might be (guarantee [...]
Categories: fixed annnuities, immediate annuities Tags: fixed immediate annuity, required minimum distribution
Financial Worries? Some Solutions for Seniors
Do you find yourself worrying about your finances? While you may think of your situation as unique, you may in fact be among the majority of seniors wtih financial worries. A recent survey by the publishers of Senior Market Advisor Magazine revealed several seniors’ responses to the question “How much do you worry about money?” A little 45% More than I should 27% A lot 20% Keeps me up at night 5% Never 3% Source: Senior Market Advisor, Senior Survey 2005 (July 2005) If the same poll were taken today, there would likely be many more who answer that financial worries are at the top of their worry list. Notwithstanding these statistical findings, financial worries do not have to control you. A more secure retirement is possible, with smart and prudent financial planning solutions to these common retirement worries: Retirement Savings Shortfall Upon reaching retirement, some seniors are surprised to discover that their retirement savings will come up short–an obvious source of financial worry. Instead of pursuing leisure activities, they find that they must curtail their spending habits in order to make their savings last. However even in retirement, you can put your savings to work for you with [...]
Categories: immediate annuities, retirement income Tags: annuitize, financial worries, financial worry, immediate annuity, retirement income
Use a Split Annuity Strategy for More Income
As a retiree, you may have Social Security income and some pension income too. But you may want an additional but assured income to round out your financial planning for retirement. You have some investment money you can generate income with but you are leery of losing your principal because you may have to rely on that income for a long time. What is an appropriate strategy for generating income but preserving your principal? You could use a certificate of deposit (CD). It is federally insured. The interest rate you will get depends on how long you tie up your money in the CD. A longer term CD typically produces a higher rate. CD’s are conservative securities representing the lower region of interest rate offerings. Nevertheless, at, say, 5% interest you can take $5,000 per year and preserve your $100,000 principal. This interest income is fully taxed and you would be left $3,300 with under a 28% tax bracket. Let’s try a better strategy… A strategy that can give you more income–and will also tie your money up for while–uses a Split Annuity. Actually a Split Annuity is not an annuity policy. It is simply a combination of two annuity [...]
Categories: retirement income, split annuity Tags: increase retirement income, split annuity
Indexed annuity
Not very long ago, investors had two options when it came to annuities. First one was variable annuity and the second one was fixed annuity. Thereafter a third type of annuity product was designed by annuity companies which is known as equity indexed annuity. An indexed annuity is designed to give a return which is close to important indices such as S&P 500 or the Russel 1000 Index. Investors who have parked their funds in index annuities can indirectly participate in the markets. Let us find out some of the other features of Index annuities and also the genre of investors for whom this product will make a good fit. This product is definitely a good fit for investors who have a high risk appetite. Imagine this scenario. An investor who has invested in indexed annuities can expect a rate of return which is 50% to 60% of the underlying index. However, if the indices are not performing well then the investor’s rate of return for the annuity can take a serious hit. The factor known as “participation rate” specifies the level at which the index annuity owners will participate in gains in the index. Consider this example. If the participation [...]
Categories: index annuity Tags: indexed annuity
Will a 1035 Exchange to Get a Better Retirement Annuity?
You can exchange one retirement annuity for another, but you as a retiree need to watch out for what you may lose in the process. Often when you have one investment and see a similar but better version of it, you wonder if you can ‘upgrade’ to the new and improved version. Generally, whenever you liquidate an investment or retirement annuity, you need to pay taxes on any gain. If you buy another investment, your cost of the new investment will be its tax basis until it is sold in the future to determine gain. However, in the case of two retirement annuities of ‘like kind’, the U.S. tax code, section 1035, allows you to simply exchange the two ‘like kind’ contrcats–if circumstances allow–so as not to have to pay tax until the latter investment is sold or pays out. In the case of retirement annuities, you need to be aware of what/how your ‘new and improved’ annuity may be different from your ‘old’ annuity. Section 1035 allows you to exchange an existing annuity contract for a new annuity contract without paying any tax on the income and investment gains in your current retirement annuity. These tax-free exchanges, known as [...]
Categories: 1035 exchange, retirement income Tags: 1035 exchange
