INCOME - The cornerstone to a successful retirement
Predictable income is how a retirement plan is built. Social Security and employer pensions are great examples of guaranteed income. A check is in the mailbox every month! In today's world, most workers do not have an employer pension plan, so our focus is on helping you create your own pension, using products that provide a guaranteed lifetime income stream that you can never outlive. Indexed annuities offer contractually guaranteed income that, along with Social Security, can cover the essential living expenses in retirement. MSF Retirement Group helps you create a guaranteed retirement income plan.
Here are Five Frequently Asked Questions and Short Answers: 1) What is an annuity? An annuity is a contract with an insurance company that has specified rates, income possibilities, and a death benefit. 2) What is the difference between Fixed & Indexed? A Fixed Annuity is a simple contract with an insurance company that provides a fixed rate of return. An Indexed Annuity is also a contract with an insurance company, but it allows for both a fixed rate of return and the opportunity for additional growth on market performance. Both are tax deferred, both can be used to create lifetime income. 3) Can I use an annuity to accumulate money? Absolutely. Fixed and Indexed Annuities are safe, conservative financial vehicles often used for the accumulation portion of your retirement accounts. The accumulation grows tax deferred until you make withdrawals. 4) Can I lose money? Fixed and Indexed Annuities provide guarantees of no loss of premium due to market downturns. You will show gains via the fixed rate or additional gains via crediting of your indexed accounts on market performance. To further clarify, your money is not directly invested in the market. Thus, if the market performs well you can benefit. If the market performs poorly, you avoid losing value. 5) Can I use an annuity for retirement income? Both Fixed and Indexed Annuities can be used to create a lifetime income that you cannot outlive. Specific percentages are based on the annuity product and the age at which you decide to begin taking income.
Detailed Answers: WHAT IS AN ANNUITY? An annuity is a contract purchased by an individual in which an insurance company pays out a monthly payment beginning upon an agreed date and is guaranteed for a lifetime assuming all of the contract criteria has been met. Annuities are long term vehicles that are designed to last a lifetime. There are three types of annuities: Indexed, Fixed, and Variable. We have chosen to not recommend Variable Annuities for clients nearing retirement age, as Variable Annuities put your money at risk. Here is a more lengthy explanation of the two types of annuities that we recommend.
Indexed Annuities Indexed annuities are a conservative place for retirement dollars. Indexed annuities usually provide a purchaser with various options for interest crediting. A buyer does have an option to elect a declared interest rate, which generally allows an allocation of anywhere from 0-100% of the account value, and functions the same as a traditional fixed annuity. However, the annuity is designed for higher potential interest, and provides other allocation options which consider the performance of an outside stock index (such as the Standard and Poor's 500, a.k.a. S&P 500) to determine the rate of interest. The objective of purchasing an index annuity is to have accumulation potential while providing guarantees of no loss of premium due to market downturns.
Fixed Annuities Traditional fixed annuities pay interest on the premium contributed at a rate declared by the insurer in advance. Some traditional fixed annuities offer multiple years guaranteed at the same rate. This rate can never be less than the minimum guaranteed rate stated in the policy. Fixed annuities are a conservative place for retirement dollars. Fixed annuity interest rates are generated from a portfolio of US treasuries or other low risk, fixed income instruments.
Retirement Income Each type of annuity offers several types of income payment options: payments for a specified period of time, payments for your lifetime, or payments for the lifetime of both you and your spouse. Growth inside an annuity is tax-deferred and because these earnings are not subject to annual taxes, your money accumulates until you begin withdrawals. Withdrawals are taxed at the tax rate in which you are in when you take withdrawals.
Annuities are long term instruments, penalties may apply for early withdrawals, surrender fees, charges and schedules may apply. Fixed and Indexed annuity guarantees are backed by the claims paying ability of the issuing company.
