Annuities: alternatives in a suffering economy

As the baby boomers head into retirement, the 65+ crowd is of record breaking size. For those of us working toward golf on Tuesdays, daytime TV and tropical cruises, this is a red flag – you will live a long life…take the steps to make sure you don’t outlive your income!

 I recommend my clients look at annuities when planning for the future, as they are an integral part of any plan to provide income after retirement.

Let’s clarify annuities, with the help of Stephen Blakely of the Employee Benefits Research Institute.

 Life Insurance…

• “provide[s] financial protection against dying too soon”                                     
• is “designed to create principal”

  Vs. Annuities…

•  “provide[s] a hedge against outliving your retirement savings”
• “is designed ultimately to liquidate principal that has been created, typically in regular payments over a number of years"

Since annuities are from a life insurance company, you name a beneficiary to avoid probate and receive your funds either as a lump sum or in a series of income payments.

 Sources to start your annuity:

 1. CD’s or Mutual Funds

Transfer your funds- annuities offer much better interest rates and tax-deferral. Your money in the bank is paying minimal rates…and you are paying income tax on that interest every year, giving you basically no return.

2. Old 401K

Convert a 401K or IRA that you no longer can contribute into an annuity. You continue the tax-free growth and most importantly protect from losses and stagnation by removing it from the stock market.

To jump start your savings, most of Miller’s annuities offer a premium bonus of 5%, 8% or even 10%! That’s IN ADDITION to the interest rate!

Further reading: Stocks Suffer Sharpest Drop Since 2008, New York Times, Aug. 2011