Maximize Your Retirement Income Now
01/15/2012 10:49 am EST
Ten thousand "baby boomers" are retiring every day, and the #1 concern that they have is outliving their money. Most people want to make sure that they have enough income for the rest of their lives.
So how can you maximize your retirement income now? The answer is by "transferring the risk" of those lifetime payments by allocating some of your portfolio to income producing annuities. Annuities can be structured for three types of income stream strategies:
- Immediate Income.or income now
- Target Date Income.or income later or at a specific date
- Combo Strategy.income now and income later
Immediate Income-Income Now
This type of an annuity is called an Immediate Annuity. It is also referred to as a Single Premium Immediate Annuity or Income Annuity. This is a pure "transfer of risk" strategy that will provide a lifetime income stream for you, or for you and your spouse. An Immediate Annuity pays you a monthly lifetime income stream just like your pension (if you have one), and your social security payments. Your agent/advisor can structure this Immediate Annuity so that if you die during the contract, 100% of the money left in your account will go to your listed beneficiaries. One of the big fallacies of an immediate annuity is that the insurance company will keep the money if you pass away. That is incorrect. To structure your lifetime payment properly, my recommendation is to contractually structure your Immediate Annuity in one of two ways:
- Life with Installment Refund
- Life with Cash Refund
These two contractual structures will ensure that you (or you and your spouse) will be paid for life, and the remaining money will go to your listed beneficiaries in full (lump sum with "Cash Refund" and in payments with "Installment Refund").
The Immediate Annuity is the original annuity structure that has been around for hundreds of years.and is still the most efficient and best annuity available for lifetime income.
Target Date Income-Income Later
Target Date Income planning can be used with annuities by adding an optional benefit to your annuity called an Income Rider. An Income Rider is a contractually guaranteed growth % that compounds tax deferred and can be used for income in the future. It is not yield, or an amount that you can "walk away" with, but it is an efficient way to plan for a lifetime income stream that you want to turn on in the future. For example, some Income Riders guarantee 6% annually that will compound tax deferred, and that amount can be used for future income. Income Riders can be attached to both fixed annuities and variable annuities, but fixed annuities provide a better value because the fees are significantly less.
Combo Strategy-Income Now & Income Later
You can also use combination strategies by placing some of your money in Immediate Annuities for income now and also placing some of your money in a target date income strategy to turn on in the future. It all comes down to what your specific dollar needs are, and a customized contractually guaranteed plan can be implemented to achieve your goals.