FINANCIAL PLANNING
When you retire, or see retirement on the horizon less than five years away, a change should occur in your thinking about your retirement assets. Your working years are your accumulation years. To be secure you should maximize your savings in these accumulation years, and you should be willing to take some risk in the hope of greater reward (especially when you are younger). As you mature and retirement and your golden years looks more like reality than a pleasant pipe dream, your thinking should change to a defensive financial strategy that concentrates on preservation of your nest egg as the primary goal.
ANNUITIES
An annuity is an investment contract sold by insurance companies based on a guarantee of fixed or variable payments for a specified period of time beginning in the future, usually tied to retirement. While annuities are not insurance policies, they are issued by insurance companies. Annuities are similar to a retirement plan where as you fund it in a lump sum or a small amount at a time and all capital in an annuity grows and compounds tax-deferred until you begin making withdrawals. Unlike retirement plans, however, there is no limit as to how much you can invest in annuities.
All annuities fall into two categories: IMMEDIATE OR DEFERRED
With an immediate annuity, the investor starts to receive payments immediately upon investing. With a deferred annuity, the investor receives payments starting at a later date, usually at retirement.
Fixed or Variable are two types of investments. Fixed annuities are invested primarily in government securities and high grade corporate bonds. They offer a guaranteed rate, usually over a period of one to ten years. Variable annuities enable you to invest in a selection of sub-accounts, such as securities portfolios, fixed interest accounts, and money market securities. These sub- accounts are tied to market performance, and often have a corresponding managed investment portfolio after which they are modeled.
Most annuities allow you to withdraw either your interest earnings or up to 15% per year without a penalty (although an annuity may be subject to taxes and a 10% federal penalty is taken, if taken prior to 59½ years of age). Most annuities have a surrender charge (a penalty for making an early withdrawal above the free withdrawal amount). Typically this surrender charge decreases over a seven year period.
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IMMEDIATE ANNUITIES
Immediate annuities, start paying the investor payments immediately upon investing. This is for investors who need immediate income from their annuity. Immediate annuities, also called lifetime annuities, provide a regular monthly income for the rest of your life, similar to a pension plan. But, unlike a pension plan, you purchase the immediate annuities with one lump sum, usually with the money from a pension or 401(k) plan after you retire, and then you start collecting immediately.
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DEFERRED ANNUITIES
1. Avoid Probate
2. Defer Taxes
3. Have No Sales Charge
4. Pay a Very Competitive Rate of Return
5. Provide a Very High Level of Safety for both
Principal and Accumulated Interest
There are three basic types of annuities:
1. FIXED ANNUITIES paying a predetermined interest rate
2. INDEXED ANNUITIES which are "indexed" or linked to a stock or
bond index most usually.
3. VARIABLE ANNUITIES which can be annuities "wrapped around"
many different types of many different types of mutual funds.
The important thing to remember is that fixed annuities "fix" your principal money. There is no market risk to your principal. This generally applies to indexed annuities as well. Variable annuities mean that the underlying principal may be at risk if the investment vehicle in which the money is invested does not do well. For this reason variable annuities may not be the proper type of annuity for a conservative strategy.
Deferred annuities are sold exclusively by insurance companies. They are called deferred annuities because all taxes on accumulating interest are deferred until the money is accessed. No withdrawals, no tax. An additional benefit is that they totally avoid probate at death of the annuitant/owner. The death benefit is paid directly to the named beneficiary. Additionally, fixed annuities and most indexed annuities carry no sales charge or load when purchased. This is not the case for nearly all variable annuities. The total amount directed to the annuity account in a fixed or indexed product goes into the account. Interest bearing fixed annuities pays a very competitive rate providing growth with safety and for senior’s safety is what it is all about.
You've worked hard to build your estate because you have dreams for the future of your family. Because you've worked hard to create a secure and comfortable lifestyle for your family, you'll want to ensure that you have a sound financial plan that includes estate and trust planning. You've made a promise to yourself and to your heirs that when you can no longer provide, your estate will enable them to realize those dreams. And now to keep that promise you need a way to help ensure that your estate will be there for the people you want to have it.
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ESTATE PLANNING
You've worked hard to build your estate because you have dreams for the future of your family. Because you've worked hard to create a secure and comfortable lifestyle for your family, you'll want to ensure that you have a sound financial plan that includes estate and trust planning. You've made a promise to yourself and to your heirs that when you can no longer provide, your estate will enable them to realize those dreams. And now to keep that promise you need a way to help ensure that your estate will be there for the people you want to have it.
Here are some questions you may want to ask yourself as you are planning for the settlement of your estate and distribution of your assets.
1. What are my assets and what is their value?
2. Who should receive these assets and when should they receive them, when I die?
3. If I cannot manage my assets while I am still
alive, who should I appoint to do so for me?
4. After I die, who will make sure all my wishes are carried
out?
5. Who should I appoint to take care of my minor children
and their property?
6. Who should I appoint to make decisions about my medical care
if I can no longer make them?
7. If I want to make sure all this to happens as smoothly
as possible, what legal papers do I need?
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