A Tip to Avoid the 2nd Financial Cliff in Retirement

A Tip to Avoid the 2nd Financial Cliff in Retirement

Everyone will face at least one financial cliff when retiring, going from a regular paycheck to Social Security and Savings.  Hopefully this step down will not be more than a 20% clip, but for many it can be as much as a 60% decrease in income.

These reductions of retirement income are the cliffs which should be planned for and negotiated.

I hike regularly in the mountains behind my home, there are large patches of scrub oak which are difficult if not impossible to pass.  If time is taken before my hike I can plan out my trail with certain markers and make the critical turns as to not trap myself in an undesirable situation too near a cliff.

What many married couples don't realize is the 2nd Financial Cliff occurs when a spouse passes.  Let me Illustrate.

Below is a  hypothetical Income situation for a couple retiring at age 66

Husband has Pension Income annually:      $36,000 

Husband has Social Security annually         $20,000 

Wife has Social Security income annually   $10,000

Total Annual Couple Retirement Income    $66,000

The $66,000 of income could in most cases provide a good retirement.  Savings, 401K money, and investments could then be used for the fun things.

Let's Assume the Husband passes at age 75.  What would be the income for the surviving spouse?

Husbands Pension is now 50%                  $18,000

Wife now get husbands Social Security      $20,000   (she loses her SS)

Total annual Widow Income                      $38,000

Total Loss of Income                               ($28,000)

For the surviving spouse this large drop in income is almost a 2nd death.  She loses over $2,000 per month with the passing of her loved one.  When is the best time to have a large drop of income?  Not now, not ever.  What is the solution? Planning ahead to avoid the cliff, see below.

Assuming this couple had 401K, Investments and or Savings money.  Had they placed $200,000 into an income annuity at age 60 her situation would be dramatically different.

New Income Scenario Assuming an Annuity purchased at age 60 and husband passing at age 75

Husbands Pension is now 50%                 $18,000

Wife now gets husbands Social Security   $20,000      (she loses her SS)

Income Annuity payment for her lifetime    $31,646     Guaranteed for the rest of her life 

Total  annual Widow Income                    $70,646  

Total Gain of Income with passing             $ 4,646 +  

A similar solution is available at regular retirement age by planning ahead with a good income annuity.  At regular retirement age you would get guaranteed retirement income for both lives and continual income when one partner passes.

The insurance industry has are some very attractive "income producing" products, with lifetime payment guarantee's, guarantee return of premiums and interest if both parties pass early, income continues even if the account value goes to zero in case of longevity. 

Not all annuities are created equal, please get competent advice.

If you want to secure a safe income passage as you approach these retirement cliffs, Please contact me for no pressure guidance.  All my consultations are free and are no-pressure and completely confidential; even the ones where I recommend you not to do business with me.

Warmest regards,

Cory Payne

Beehive Insurance Retirement Planning Services

cpayne@beehiveinsurance.com

801-685-6860

   

Do You Make These 3 Mistakes When Thinking About Retirement?

Do You Make These 3 Mistakes When Thinking About Retirement?

I've talked with couples and singles about retirement planning and the most common "talking points" I hear are shown below.  

Do You Have Plan?  Most people say "I don't have a plan, I don't know what to do.  I don't have knowledge as to what I should do.  That was the position I found myself in when I looked at the "ashes" of my 401K after the stock market correction of 2007-2009, I've been a student of retirement strategies ever since.

Many people are hoping someone else will help them plan their retirement.  Some are professional procrastinators. Do you know any procrastinators? (no hands please)  But if you roll up to age 66 without a plan there's a large probability you'll be without anything but Social Security money before the end.  How would that make you feel?

Is There Too Much Risk in Your Retirement Portfolio?  I told my investment adviser back in 2005 that I wanted minimal risk in my 401K portfolio.  A 42% loss was not my idea of minimal risk, I was devastated.  Retiree's and future retiree's cannot afford to have their money to go backwards. I want to stop this from happening to you.

Many I've spoken with said prior to 2009 they wanted to leave a legacy for their grand children, now several have said they're just hoping not to run out of money during retirement.   

Do you know there are Safe and Secure Money Alternatives?  Safe and secure retirement solutions are available if you know where to look.  It's exciting give hope to help educate clients.  Retirement students are shocked at how easy these steps are to implement.

There are many ways to keep your money out of harms way before disaster happens.  I can easily show you how to protect your future retirement.

Conclusion:  Safety of my Retirement Money is Critical.  Safety of Your Money is my Top Priority. 

Please let me know if you have any questions.

Cory Payne

Beehive Insurance Agency

cpayne@beehiveinsurance.com

801-685-6860

Understanding Fixed Indexed Annuities

 

What is a Fixed Indexed Annuity?

Fixed indexed annuities are secure investment vehicles issued only by life insurance companies. Fixed index annuities offer the guarantee of principal and the potential of market-linked growth, with no risk of losing principal due to market swings. The fixed index annuities have the same features, benefits and guarantees as traditional fixed annuities plus the potential for you to earn greater interest credits. 

 

Annuities are like pensions, most pension plans use insurance companies for their pension payouts. 

 

Benefits of Annuities: 

 

Guarantee of Principal: With a fixed indexed annuity, you are guaranteed the safety of your principal, regardless of stock market fluctuations. The insurance industry is regulated and cannot place policyholders’ money at risk.

 

This was big deal for me after the 2007-2008 crash. If my retirement money in 2009 had stayed the same as it sat in 2006, I would be doing cartwheels. Instead, because my money wasn’t in a fixed indexed annuity, I had a 42% loss of my retirement savings - even while making 401K contributions during that time.

 

When nearing retirement age, don’t make the mistake I made. Protect your retirement income by transitioning to the security of a fixed indexed annuity.

 

Tax Deferred Growth:  Any interest earned in your fixed indexed annuity is tax deferred. What does that mean for you? Quicker growth over a shorter period of time.

 

Guaranteed Lifetime Retirement Income Stream: People are living longer than ever. That means your retirement income must last longer than ever before. Retirement Income Author Tom Hegna suggests planning for longer than you expect. He says, “You cannot plan to have income until age 90 any more - you really need to plan to have income until age 100 and possibly beyond."

 

My parents are 87 and 84 and going strong. I feel I need to plan on 30 years and probably an extra 5 years for my wife in retirement. Will your money last 30 years?

 

A fixed indexed annuity guarantees a yearly sum, no matter how long you live. That means you’ll have the security of a check in the mailbox every month for the rest of your life.

 

Liquidity:  Typically, you can get penalty free withdrawals up to ten percent, once each year after the first year (check your contract). While somewhat limited, the benefits of the guaranteed annual payments outweigh the liquidity concerns for most investors. Especially when close to retirement age, this level of liquidity should not be cause for concern. Give a trusted insurance company your money and they'll guarantee X dollars now and X+ dollars in the future.  

 

I placed $100,000 in a fixed indexed annuity with a strong A-rated insurance company. My wife and I will receive a minimum guarantee of $10,000 per year the rest of our lives at age 67.  This money was originally banked for retirement and my bank’s returns were not satisfactory. While I will not touch this money until I retire and I know exactly how much the monthly guaranteed payment will be.

 

Additional Liquidity Safety Net:  Some contracts give you a 100% penalty free withdrawal for a terminal illness after the first 12 months. And a 100% penalty free withdrawal after the 3rd year if confined to a qualified nursing home.  Not all contracts are created equal please get competent advice.

 

Annuities Avoid Probate:  In almost all cases, annuity proceeds go to your beneficiaries upon death of the investor. This benefit helps you avoid the additional loss of probating. Depending on the terms of your annuity, the beneficiary may receive a lump sum or number of payments.

 

Upfront Bonus:  Some annuity companies offer incentive bonus money for moving your IRA, 401K, savings and or investments.

 

Do you have Long Term Care Coverage?  Some fixed indexed annuity contracts offer additional payouts - up to five years - if you’re unable to do two of the following tasks: bathing, dressing, feeding, toileting, continence and transferring (moving in or out of bed) by yourself.  The additional payments could provide the necessary care needed. 

 

 

Commonly Asked Questions:

 

Are Fixed Indexed Annuities registered investment products?  No. Almost all fixed indexed annuities are insurance contracts, regulated by state law and state insurance departments. 

 

Can Contract-holders make withdrawals from their Fixed Indexed Annuities? Yes, see the section on liquidity above.

 

What is the likelihood that the insurance company will go out of business?  Very unlikely. Guaranteed fixed indexed annuities are considered safe because the underlying premiums are not subject to loss in the stock market.  Each state has an insurance commissioner who reviews products issued by that company in their own state. That commissioner makes sure that the company keeps a sufficient surplus on hand to satisfy claims.  

 

Also, your premiums are primarily put into U.S. Treasury and investment grade corporate bonds, so the money is not at risk in the equity markets.

 

The fixed index annuity is a proven success story for retiree's needing guaranteed income during retirement.  

 

Insurance = Safety

 

Cory Payne

Beehive Insurance Retirement Planning

cpayne@beehiveinsurance.com

801-685-6860

A compelling retirement concept

A Compelling Retirement Concept!
It's all about INCOME during retirement.

I have a friend who owns a duplex.  He paid $400,000 for this apartment when he was 55 (8 years ago). He's had good tenants and bad.  He's paid legal fee's to have the bad removed, replaced the roof, repaired walls and carpets.  

He nets about $15,000 annually depending on the year, and this is going to supplement his social security payments.

He's not looking forward to being a landlord the rest of his life but he believes he'll need the income.

Had he placed this $400,000 with a strong insurance company, American Equity for this example, he and his wife at age 65 would be guaranteed $33,667 annually for both of their lives, with no tenant head aches.  The math is the same for deposits of $5,000 to $1,000,000

If they lived until age 90 their payments would exceed $841,675.  $33,667 divided by $400,000 = 8.42% annual yield.  And payments continue until the 2nd death.

Are there downsides to this insurance product?  Yes, to insure the annual payment of $33,667 at age 65 they'd have to not access the cash, but if he wanted cash he could access 10% per year without penalty.

What if they both die early?  All remaining principal and interest would be returned to their beneficiaries.

What if the Stock Market Crashes Again?  There will be no loss of principal since these funds are not invested in Wall Street but placed an insurance company.

What if they wanted to retire at age 60?  They'd receive $22,511 annually guaranteed for both lives (5.63% yield).

I moved $100,000 of my savings to American Equity last year and will receive nearly $10,000 annually when I retire, this is for the rest of our lives jointly.  I'm too young to access my 401K money (under 59 1/2) but next year I'll quickly move some of that money to add another layer above my Social Security payments.

Had I left my money in the bank, my same spend down of $10,000 annually would exhaust my savings in 10 1/4 years.  

I don't like the Wall Street "gamble" as I call it, so I don't play there.  

I've always wanted safe "rental income" during retirement.  I've now created my own pension (rental income). And you can too.

I appreciate any and all comments.

Cory Payne

Beehive Insurance Retirement Planning

cpayne@beehiveinsurance.com

801-685-6860 

What Happened to the Good Old Days of Retirement?

What Happened to the Good Old Days of Retirement?

In the good old days my parents and neighbors worked for their employers many years, often it was the same employer.  When the "golden" age of 65 came around they received a shiny new watch, had a party and walked out the door with a Pension and Social Security.  Often times all their basic income needs were met with these 2 guaranteed monthly income sources.

Personal savings and investments were used to travel, visit the grand kids, dinners out, attend ball games and help pay for grand children's college cost.  In a way retirement was already worked out for them with their employer Pension and Social Security without any thinking or planning ahead on their part.

Things today have really changed.  Today we face a financial/income cliff at retirement when money from Social Security will most likely be 1/3 or less than what we currently make.

I personally know people in their 60 who've worked for over 7 different employers.  Most couples have no pension, a couple of small IRA's, a 401K, and some savings accounts.  They worry about spending down their money quickly and living only on Social Security.  Safe planning for these folks is a must to ensure retirement income doesn't cease.


How can you make your money last?  This will be the discussion.

I've been on a six year mission after my 401K dwindled by 40% to find answers to my retirement income questions and I've discovered some great solutions within the insurance industry.  Things like Guaranteed Retirement Income for life (money in your mailbox every months for life) has given me peace of mind going forward.

I'll quote from many articles such as TIME Magazine and the Harvard Business Review that suggest these secure income product as a top choices.

I'll discuss the upside and the downside to these products and other investments.  I hope you'll find the discussions compelling and helpful.

Please come back! :)