The Income Strategies Can Really Make a Difference in Retirement
Purchasing guaranteed lifetime income with a cost of living adjustment rider (COLA) is growing in popularity among financial advisors to help solve three retirement risks: longevity, inflation and market volatility.
Some seniors have elected to purchase “blocks of income” that stagger distribution start dates at critical milestones in retirement. In fact, the government created a Qualified Longevity Annuity Contracts (QLAC) to defer portions of qualified plan required minimum distributions (RMDs) beyond age 70 without a penalty. Guaranteed income in retirement is now the name of the game.
Guaranteed lifetime income can be generated from single premium immediate annuities (SPIA) or deferred income annuities (DIA) as well as guaranteed lifetime withdrawal benefit (GLWB) riders attached to an indexed annuity.
The inventory of insurance companies who manufacture annuities that offer guaranteed lifetime income is extensive. There are many online annuity boutiques that display these types of annuities. One of these firms is CANNEX. Until you run various scenarios, you don’t know if the SPIA, DIA or GLWB rider wins the day. CANNEX not only displays these types of annuities, but it calculates payout scenarios under life only (one life) and joint-life only (two lives). Payout scenarios can be lifetime, lifetime with 5, 10, 15 or 20 years certain. They can include a cash or installment refund. Watch the interview with popular platform speaker, best-selling author and PBS host Tom Hegna, who talks about annuity distribution options. [URL]
As an example: a male and female, both age 70 with a $100,000 deposit are reviewing their monthly payout options based on both their lives. Life only is $524, life only with 10 Years certain is $522 and life only with 20 years certain is $499.1 The stated payout rate for a 70 year old may be 6.29 percent. That’s not to be confused with the actual rate of return, which may be around 3.5 percent based on the annuitant’s life expectancy. But buying blocks of income to fit your retirement timeline is an excellent way to establish, at the very least, a financial floor that addresses your domestic spending requirements throughout your entire retirement.
1 Annuities, Power Point Presentation January 2016 Tom Hegna
Syndicated financial columnist and talk show host Steve Savant interviews Tom Hegna, popular platform speaker; best selling author and retirement expert. Tom hosted the PBS Television Special “Don’t Worry Retire Happy.” The television special was designed after Tom’s latest book, “Don’t Worry Retire Happy.” Tom’s first book, “Playchecks and Paychecks” drew critical acclaim from financial advisers and insurance professionals.