4 Important Risks at Retirements Solved By Annuities



Once you retire, you may think that you are done with risk. You can’t lose your job anymore since you don’t work. You can’t lose your house as your mortgage is most probably paid off by now. Then, there is not much to fear… or this is what you believe.


Unfortunately, there are several risks a retiree must face. Most of them are related to financial matters and can be solved with a little planning. For example, annuities can answer many of your retirement concerns. There are four risk annuities can solve at retirement:

 annuities and retirement

#1 Outliving Your Assets – You Still Live But Your Bank Account Died


One of the biggest risks at retirement is to spend all your money and still be alive. 50 years ago, when one retired, he had roughly 5 to 10 years to live. Today, you can retire as early as 55 or 60 and live until… 90! A life annuity could solve this concern quite easily. Since a fixed annuity is a guarantee stream of income until your death, you don’t have to worry about spending too much in your early days of retirement. You are set to receive the same pension forever.


#2 Loss of Spouse – Where Do You Find The Money?


We all know that living as a couple help cutting down on expenses such as rent, utilities and transportation. Once your spouse passes away, you are left to assume all expenses by yourself. This could be a problem if you haven’t planned it already. With a joint life annuity, you have the possibility of receiving the same pension payment after the first beneficiary deceases. Therefore, your budget is the same before and after your spouse passes away.


#3 Healthcare Assistance – How to Afford Nurse at Home


With aging population come healthcare growing needs. Several retirees prefer to stay in their home and require the help of a nurse from time to time. This is a good way to postpone your entry in a retired home. However, such service requires a good pension to afford it. This is where annuities come into play. If you purchase a longevity annuity, you will start receiving payments about the same time you may require healthcare services. This type of annuity is some kind of guarantee you can afford a nurse at home for a while and enjoy your place as much as possible.


#4 Inflation – What Used to Cost a Dollar


Inflation is definitely well hidden behind other retirees concerns. A small rise of 2% of your cost of living seems meaningless at first. But this is what makes a big difference if you enjoy retirement for the next 20 years. What used to cost a dollar will eventually double and this is true for most goods you purchase. Variable annuities allow the investor to increase its payment overtime. Since the investment return depends on the investment in the sub-accounts, you have better chance to match the inflation rate and keep your power of purchase intact during retirement.


Confused? Curious? You are looking for answers about annuities? Contact a trusted adviser that will take the time to explain you various options offered to you.

Annuities & Retirement How to Retire Without Worries

lonWill I have enough money to retire?


This is a question that most people are asking themselves. It gets even more crucial questions as you turn 50 and you see retirement coming forward. Governments won’t be the most generous around with their social pension plans, your employer is probably not under any guarantee to pay a fixed pension and your savings… well you simply hope to not retire before the next crisis.


But what if you could enter in a contract guaranteeing you that you will get paid each month? No more worries, no more uncertainty, just a sustainable income stream for your retirement. Annuities could be a great solution for your retirement plan by providing you several advantages. Here’s a list of a few reasons why annuities and retirement go well together:


You Can Start Investing in an Annuity Today and Retire Later


One of the most unknown advantages of an annuity is the fact you can buy an annuity now and start saving money inside the contract. This is called a deferred annuity plan. You are basically building up your annuity while you still earn a pay check in exchange of a pension like payment at retirement. The interest rate paid by the annuity could be fixed (linked to certificate of deposits and bonds investments) or could be variable (linked to the stock market performance). You are not only building your own secured pension plan with an annuity but you also defer taxes on potential gains realized inside the annuity.


An Annuity Helps You Budget at Retirement


A common mistake with young retirees is to start spending money like they never did. You might be sitting on $500,000 or more in your retirement account (like a 401(k) or a 403(b)), but it could melt faster than you think if you don’t budget properly. A new car and a few oversea trips later and your $500,000 nest egg could drop to $400,000 within a few years.


After the purchase of an annuity, you will receive a steady payment on a monthly basis. Therefore, you will have to budget your retirement needs according to your annuity payment. This is a great way to ensure you don’t fall short after a few years of crazy spending!


The Annuity Insure You Against the Longevity Risk


Do you know one of the most important risks for retirees is to outlive their savings? 50 years ago, a retiree could budget until he is 75 and would not risk to lack of money before his death. Today, it’s not rare to encounter retirees who are 85, 88 and even over 90! My two grandmothers are still living and they are 90 and 92! If they would have bought an annuity at the age of 60, they could have spent a lot more at retirement.


The Life insurance company pays you according to your chances of being or not being alive in the next 10, 20, 30 years. Since they insure a lot of individuals, they calculate their break even point (and their profitable point) where they pay more for a few people who live over 85 and cash the money from the annuity from those who decease earlier.


The Annuity is a Great Tax Management Tool


If you need to withdraw money from any type of pension account, you are deemed to pay an important amount of taxes to the government. Nobody wants to retire and owes money in taxes! As your income is more limited, tax planning becomes crucial.


The annuity payment allows the investors to spread its tax bills across his entire retirement instead of paying taxes on lump sum withdrawals. If you purchase an annuity with cash coming from your bank account, you will also benefit from a tax advantage since part of the annuity payment will be considered as a return of capital and won’t be taxable.

A Retirement Plan Should Analyze Annuities


If you go see your financial advisor for a retirement plan, he should definitely analyze the possibility of adding an annuity or a combination of annuities to meet your retirement needs. There are several uncertainties around retirement and annuities are part of the tools to reduce your worries at retirement.


If nobody told you about annuities, you should speak about it with an advisor for free now.