Watch Out For These Retirement Pitfalls

When it comes to retirement planning, one of the most important things you can do is to make sure you’re creating a portfolio that will provide you with lifetime income. To do this, here are a few retirement pitfalls to avoid:

1. Waiting Too Long to Save. With average life expectancies increasing, it’s becoming more and more difficult to create a nest egg that will provide you with lifetime income. It might seem simple, but it’s worth repeating: the earlier you start saving, the more likely you are to have income that lasts as long as you do.

2. Not Taking Advantage of “Free Money”. If your company offers a 401(k) or an employer-sponsored plan, consider contributing to it. Think of any match your employer makes as “free money.”

3. Underestimating Medical Expenses. According to a recent estimate by Fidelity, a 65-year-old couple retiring this year will need an estimated $245,000 to cover medical expenses throughout retirement, up from $220,000 last year. That’s why it is so important to make savvy financial decisions and start planning for retirement early so you’re prepared for not only any medical expenses, but are also able to enjoy retirement.

4. Lack of Balance in Your Portfolio. While a 401(k) is a great start to a retirement portfolio, it likely won’t be enough for retirement and will need to be supplemented by another product. For example, a Fixed Indexed Annuity can provide much-needed balance to your portfolio and can offer guaranteed lifetime income.

5. Relying on Social Security Only. It’s no secret that Americans are questioning the future of Social Security. It’s important to know that Social Security might not be enough to get you through retirement comfortably, and to keep in mind the importance of a balanced portfolio supplemented with other retirement products.

6. Retiring Too Early. While it might be tempting to retire early and take advantage of traveling, remember that you’ll need your money to last as long as you do, so it might be worth waiting a few years.

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IALC Q3 2016 Newsletter

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Americans’ Top Retirement Fears

This month, IALC released new data that explored Americans’ Top Retirement Fears and found Americans may not be as prepared for retirement as they need to be in today’s volatile market. More than 50 percent of Americans are afraid of outliving their income or their inability to pay for basic necessities like healthcare, but are not changing their financial lives to address their fears, according to a new survey released by the IALC.

Even with this fear, many are not taking the necessary steps to prioritize future savings over their current expenses. In fact, a quarter of Baby Boomers – the age group closest to retirement – have less than $5,000 saved for retirement and nearly one in five Americans have no idea how much they’ve saved.

When taking a closer look at exactly what Americans top retirement fears are, the IALC found they include:

  1. Outliving their income (25%)
  2. Maintaining their current lifestyle (23%)
  3. Healthcare expenses (19%)

Want to learn more about what Americans are most concerned about when it comes to their retirement? Check out the survey data here.

Get Social and Tweet It: The average retirement lasts more than 30 years—are you prepared? Learn how to have income for life @IALCouncil #fixedindexedannuities

 

Keep Up on Retirement News

Want to stay up to date on the latest retirement and Fixed Indexed Annuity news? Check out IALC’s news widget, which links to the latest retirement news. To include this widget on your website, you can find the easy download information here.

 

Debunking 12 Myths about Fixed Indexed Annuities

To mark Annuity Awareness Month this June, the Indexed Annuity Leadership Council is debunking the top 12 myths about FIAs.

Read the full blog here.

 

Summer Vacations and Retirement: Budgeting for Both

While a vacation may last a week or two, retirement may last upwards of 30 years. Neglecting to plan for a period of your life that might last nearly three decades, during which you’ll need to rely on savings, may make your golden years more difficult than you’d expect.

Read the full blog here.

 

Making The Case For Fixed Index Annuities
Nasdaq
July 6, 2016

Once you get your first job, start contributing to any retirement plans your new employer offers as soon as possible. Try to contribute at least enough to receive the full employer match if one is offered.

Read More …

The Fixed Annuity: It’s Like Buying a Pension
The Motley Fool
July 3, 2016

In the old days, many people looked forward to pension income in retirement, but few private-sector companies offer pensions any more. Thus, most of us need to rely on ourselves more than ever to provide for our retirements.There’s a good chance you’re not an annuitant with guaranteed pension income coming to you. If that’s true, and you’re wishing you could enjoy a fixed income stream in retirement, look into annuities. Investing in certain types of annuities is a lot like buying yourself a pension. It will send checks regularly your way — for the duration of the contract or the duration of your life.

Read More …

 

 Estimate your retirement living expenses or calculate your rate of return using these tools.

 

 

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Everything You Need To Know About FIAs

Different retirement products and savings strategies seem to be everywhere we look these days, but there’s one retirement product that is making headlines. In 2015, Fixed Index Annuities (FIAs) saw record-breaking sales, an increase of 13% just since 2014, according to the LIMRA Secure Retirement Institute’s fourth-quarter U.S. Individual Annuities Sales survey. But why are FIAs gaining so much popularity? Below, we’ve outlined nearly everything you need to know about FIAs and why so many Americans are taking notice:

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Brexit and Your Financial Future: Top 5 Articles to Read

The world continues to watch closely as the consequences of Brexit—Britain’s recent decision to separate from the European Union—unfolds. Financial markets in the United Kingdom (U.K.) are beginning to feel the impact of the decision, and many experts believe the country’s economy could experience a recession.

While it’s tempting to think that financial woes will stay on one side of the Atlantic, it’s important to remember that such shifts in the global economy can certainly have a ripple effect in our own economy. This market volatility could have an impact on your personal budget and your retirement. That’s why it’s important to keep a balanced retirement portfolio, combining some riskier products with more conservative savings options such as Fixed Indexed Annuities (FIAs), to help guard against market swings and market volatility like those stemming from Brexit.

To learn more about the effects Brexit on the global economy and could have on your financial future, check out these articles:

1. Reuters: Tracking Brexit – how referendum shock is affecting UK economy

“Britain looks set for an economic slowdown and possibly a recession after voters decided to leave the European Union in a referendum on June 23.”

2. CNBC: Brexit could bring a little discussed drag on the US economy

“While the effect on U.S. stocks has been fairly muted so far, with the S&P 500 down only roughly 1 percent since the vote, we can already see broader effects on the global economy.”

3. The Wall Street Journal: U.S. Economy Looks Likely to Weather ‘Brexit’ Storm

“The U.K.’s decision to exit the European Union may rock the overall U.S. economy in coming months. But it isn’t likely to sink it. Once the initial market turmoil abates, the “Brexit” decision will become the latest in a long list of headwinds contributing to the American economy’s sluggish growth.”

4. Time: Why Brexit Really Is a Big Deal for the U.S. Economy

“Politicians and technocrats of all stripes are trying to reassure Americans that Britain’s vote last week to leave the EU won’t affect them economically. They are wrong.”

5. US. News & World Report: The U.S. Economy: A Post-Brexit Assessment

 “Near-zero GDP growth. Strong dollar. Weak exports. Factory recession. Federal Reserve hesitancy. Low inflation and low interest rates. Solid consumer spending. Accelerating construction. Rising home sales. China turning the corner? These keywords were seen frequently in news stories prior to the world-startling June 24 Brexit vote.”

 

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Panic Grows About Living Too Long, Without Enough Money to Actually Live

Imagine fearing life more than death. That’s a reality many Americans face as nearly 50 percent of Americans are afraid of outliving their income or their inability to pay for basic necessities like healthcare, according to a new survey released by the IALC.

However, Americans are not taking the necessary steps to put saving for the future over current expenses. In fact, a quarter of Baby Boomers – the age group closest to retirement – have less than $5,000 saved for retirement and nearly one in five Americans have no idea how much they’ve saved.

For context, find out how much you’ll need for retirement using a calculator here.

Not only are Americans worried they won’t have enough funds to get them through retirement, they’re also worried about having enough savings to cover basic necessities for the rest of their life. In fact, 1 in 5 Americans are most afraid of being unable to cover healthcare expenses. While Americans may be afraid of the unknown when it comes to allocating their money in retirement, they must budget for the unpredictable expenses such as healthcare expenses and life expectancy.

With Americans living longer than ever, they need to take steps now to mitigate risk and plan for a better retirement. Fortunately there are strategies and products available that offer guaranteed lifetime income, helping to ease the stress of stretching your nest egg to cover unexpected expenses for longer than anticipated.

To take control of your retirement planning and ease your worries about outliving savings, here are a few steps you can take today:

  1. Make a budget. Those who plan for retirement are estimated to save three times more than those who don’t. Take into account that your expenses may increase during retirement, specifically for items such as healthcare and travel.
  2. Build a balance. Investing in a 401(k) is a great way to start a retirement portfolio, but it’s important to keep a balanced portfolio to protect against market swings. One method to provide balance to your retirement portfolio is to add some more conservative, low-risk products, such as Fixed Indexed Annuities (FIAs), which protect your principal regardless of market ups and downs. According to the survey, products like FIAs are an attractive choice for consumers, with 45 percent of Americans surveyed interested in this type of retirement product.
  3. Plan to adjust. A savings strategy that makes sense today might not fit your needs in five, 10 or 20 years. Assessing your investment mix at different stages in your life is key – when you’re young, a higher-risk investment strategy may be more effective, whereas the closer you are to retirement, the more important a low-risk portfolio may be, with more conservative products such as Fixed Indexed Annuities.

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Debunking 12 Myths About Fixed Indexed Annuities

To mark Annuity Awareness Month this June, the Indexed Annuity Leadership Council is debunking  the top 12 myths about FIAs.

1. Myth: FIA policyholders assume risk

Fact: With FIAs, your principal can never decline in value due to index volatility

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2. Myth: People buy FIAs for higher returns

Fact: People buy FIAs for safety of principal and guaranteed lifetime income

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3. Myth: Companies keep value of annuities upon death

Fact: FIAs can allow proceeds to go directly to a beneficiary in the case of a death

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4. Myth: FIA owners have no access to their funds to help in lifestyle changes

Fact: FIAs can include enhanced benefits. Riders and other contractual benefits are generally available to help consumers in a time of need.

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5. Myth: FIAs are only for conservative savers

Fact: FIAs can be a key component of a balanced financial plan

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6. Myth: FIAs are for more savvy savers

Fact: FIAs can be a retirement product for savers at any level

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7. Myth: Any retirement account can help generate lifetime income

Fact: FIAs can guarantee a steady lifetime income stream

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8. Myth: Withdrawing monthly from retirement accounts is the same as a FIA

Fact: FIAs offer the benefit of a steady lifetime income with minimum guaranteed interest credits

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9. Myth: There are no tax benefits to FIAs

Fact: FIAs can offer tax-deferred growth

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10. Myth: Only retirees purchase

Fact: Even younger savers are interested in FIAs, recognizing the benefits of growth and balance

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11. Myth: FIAs are a risky way to save for retirement

Fact: FIAs protect your principal from the uncertainty of market volatility

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12. Myth: FIAs offer no growth

Fact: FIAs protect your principal, while still giving you potential interest credits – assuming no early withdrawals

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Summer Vacations and Retirement: Budgeting for Both

With Americans living longer than ever, planning for retirement should be a top priority. Yet according to a recent study from Charles Schwab, Americans are spending more time planning for summer vacations than for retirement.

While a vacation may last a week or two, retirement may last upwards of 30 years. Neglecting to plan for a period of your life that might last nearly three decades, during which you’ll need to rely on savings, may make your golden years more difficult than you’d expect.1

With summer right around the corner, remember to continue planning for your retirement as you plan for your summer vacation. Here are a few retirement planning tips so that you’re as prepared for retirement as you are for your summer travels:

  1. Make a budget. Those who plan are estimated to save more than 3 times those who don’t. This is especially important to remember when planning your retirement. Consider your vacation budget and make sure it’s not negatively impacting your retirement savings.
  2. Pay off your credit card on time. Waiting to pay off your credit card is a fast and easy way to accrue interest and lose money in the long-run. Paying your credit card bill on time will allow you to put more money away for summer vacations and your retirement.
  3. Set up automatic transfers. While it’s easy to promise yourself that you’ll transfer money to a savings account each month, it’s helpful to set up automatic transfers so that you’re still putting money away for retirement while you’re planning trips.
  4. Take a look at your portfolio. While investing in a 401(k) is a great way to start a retirement portfolio, putting all your eggs in one basket is a common mistake. Take a look at your portfolio and make sure it’s diversified – incorporating low-risk options, like Fixed Indexed Annuities, is one way to provide much-needed balance.
  5. Take advantage of technology. Knowing where your money is going is a key first step in planning for your future. While you may be using apps to help you book your travel, there are several apps that can help you identify how much you’re spending in certain areas and help you decided how to reallocate those funds to savings.

 

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IALC Challenges DOL Fiduciary Rule

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4 Retirement Questions Job Seekers Should Ask

Too often when reviewing a job offer, we focus just on the salary or the number of vacation days. However, it’s important to evaluate the entire offer package and consider what benefits a prospective employer is offering not just yearly but also over time.

Specifically, an employer’s retirement benefits can add more value to a job offer than you think – if you ask the right questions and take advantage of their offerings.

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However, many employees don’t make the most of this opportunity. For example, recent report by Pew Charitable Trusts found that only 49 percent of employees sign up for their retirement plan when eligible.

To help you discover what prospective employers have to offer here are 4 questions to ask when evaluating a job offer:

  1. Are employees offered retirement savings vehicles? The first question to ask is what types of retirement plans the company offers to employees and how long you need to wait to have access to them. Employers commonly offer 401(k)s, but there may be other plans available to you.
  1. Does the company match contributions? An employer may offer to match a percentage or all of your contributions to a retirement account. Some employers may even contribute to your retirement account each year whether you save or not. Any match your employer is willing to make could be considered “free money.”
  1. What is the vesting period? Often matching retirement contributions are not fully vested until you’ve worked at the company a set amount of time. This is something to consider if you’re not planning on staying with the company long or if you’re preparing for retirement in the near-term.
  1. Ask yourself, are the retirement offerings sufficient for my retirement goals? An employer sponsored 401(k) may not be enough savings to last you through retirement and will likely need to be supplemented by another product. It’s important to manage and keep your savings strategies current and mitigate risks with a balanced portfolio. One option to consider is a Fixed Indexed Annuity (FIA), which can help diversify your portfolio and protect your principal from market volatility while generating guaranteed income.

Lastly, don’t forget about previous retirement accounts and consider if you need to transfer any savings from retirement plans with your last employer.

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Why You Should Consider A FIA

By Tom Hegna

In the past, some consumers looked at Fixed Indexed Annuities, or FIAs, as “overcomplicated products,” that over-promised and under-delivered. That’s no longer the case. Even with today’s volatile market, these products have performed extremely well over the past 15 years. After raising the overnight rate this past December, Janet Yellen and the U.S. Federal Reserve kept rates stagnant in the first quarter of 2016, with global economic uncertainty as the main reason. If the Fed is unclear of the economy’s future, how can you make clear financial predications?

Rather than attempting to predict the future, why not alleviate risk with a diversified retirement plan?  FIAs are reliable products that can provide peace of mind and balance to anyone’s portfolio. Here are a few reasons why you might include FIAs as part of their retirement plan:

  1. Accumulation Without Market Risk – If you need peace of mind that their principal won’t go down, FIAs can offer a unique balance and security against turbulent markets. If the index is performing well, you are able to capture a portion of the upside and will see interest earnings somewhere closer to the cap. If the index is performing poorly, the downside is limited with the guarantees built in. If retirement is all about taking risk off the table, an excellent way to remove the market risk is with a FIA.
  1. Tax Deferral – The spring is a good time of year to think about your taxes. When you file your taxes, ask yourself if you have a plan for taxes in retirement—you would be surprised how many people don’t take taxes into account. With a FIA, while there usually is income tax paid when withdrawals are made, you can have the benefit of tax-deferred earnings, which will allow you to earn interest on the principal, interest on the interest, and interest on the tax savings!
  1. Peace of Mind – Having a secure source of income can help add peace of mind; in fact, Towers Watson produced an entire whitepaper about the correlation between income and happiness. The stream of guaranteed income offered by FIAs acts as a consistent paycheck, though there can be early withdrawal charges for certain withdrawals before the end of the surrender charge period, so that it’s easier to plan for purchases and costs in retirement, which can really help you sleep at night.

In addition to these three reasons of how FIAs can benefit your retirement portfolio, there are several additional advantages, including avoiding probate and protecting your spouse. Over the past few years, we have seen dramatic increases in FIA sales across the United States. As life expectancy increases and more people purchase annuities, these very well may be the highest payout rates you will see for the remainder of their lifetime.

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