Are Annuities Good For Retirement How Much Should You Invest

Should you use annuities in your retirement? Yes! How much? That is a much more complicated question. There are a lot of factors to take into account.

The main factor is your monthly budget. Your monthly budget of how much income you need is probably the most important calculation for your entire retirement plan. It is up to you to get it right. Your advisor only knows what you tell them. If what you tell them is not exactly accurate then your entire retirement income plan will be wrong.

Once you have a strong budget you can then look at the other factors like guaranteed income and principal protection. Guaranteed income creates a baseline, minimum income from which to create your retirement plan. Keep in mind it is a minimum income. What the income guarantee does is build some security into your investments. Imagine if you knew right now that you all through your retirement you would have your minimum income needs completely taken care of and you might do a lot better than just the minimum.

Principal guarantees are used for similar reasons especially if you are newly retired or close to retirement. If your investments go down significantly just before retirement then you are in trouble unless you have an ample amount of assets to take the hit.

T o learn more about annuities in retirement read - Are Annuities Good For People That Are Retiring Now?

To learn more about how much to invest into an annuity read - How Much Should You Put Into An Annuity?

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Starting A Retirement Plan For Your One Person Plus Business

Retirement plans seem like a great benefit for large businesses but did you know even if you are a one person business (plus spouse) you can have your very own 401k? The one person 401k is one of the best retirement plans in existence today.

It is called the Solo 401k or Safe Harbor 401k. Basically, it works exactly like a regular 401k with the exception of no nondiscrimination testing. If you are not sure what non discrimination testing is then don't worry about it! You don't need to know with this plan!

To top that off, you can also open the 401k as a Roth 401k meaning that depending on your income you might be able to contribute $50,000 per year into a Roth account or $100,000 annually if you spouse works with you. If you use annuities for your Solo 401k investment you can also create guaranteed income for life.

The IRS has the best resource when learning about the 401k plan; just remember that the IRS calls it the Safe Harbor 401k. Visit their 401k Landing Page for all of the details. Keep in mind the IRS site is written in accounting terms but it is a great way to get started. Since tax law creates retirement plans, the IRS website is an original source. Technically, congress creates the law but I honestly don't how to find the original laws to peruse in my free time and I probably wouldn't anyway.

To learn more about the awesome benefits of the Solo 401k when combined with annuities read - Should Your Solo 401k Be Invested In An Annuity?

To learn more about why annuities belong in business retirement plans read - The Pros Of Annuities In Business Retirement Plans

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Worried About Your Retirement Income How About Guaranteed Income

You should be worried! After all your retirement income is what sustains for your entire retirement which could be 30 years or more! If you take steps now you can make sure you never run out of income.

If you are worried about your retirement income you should look into adding a few guarantees to your portfolio. Imagine a guarantee that pays you income for life and allows you access to your principal. It used to be either or but now it is either and! Does that make sense?

What we are talking about is adding a safety net to your investments. A safety net that says you will never run out of income even if your investments go to zero. If the market does poorly or if it is even flat you could be in trouble during retirement.

A few flat years and you are withdrawing from your principal just to survive. Each withdrawal makes it harder and harder to catch up. With a guarantee those worrisome down years could be eliminated completely.

What do you really need from your investments during retirement? You need income right? A lump sum helps as you can take income from it but income is your real need.

A guaranteed income stream is essential to a successful retirement. It can act as a safety net and also allow you to invest more aggressively with the rest of your retirement money with no worries about losing your retirement income generating assets.

To learn more about how to create guaranteed income for your retirement read the new article on guaranteed income riders - Guaranteed Income Without Losing Access To Principal?

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Does Your Annuity Bonus Make Up For Transfer Fees

Bonus annuities and recovering fees is a complicated question. The short answer is maybe. The long answer includes many variables.

In theory, a bonus is a replacement if the annuity bonus is more than the cost to sell other investments and move the money into the annuity. The annuity is not specifically designed to recover lost money because of selling investment for transfers. It is hair splitting on words but stick with me for a minute. I believe it is important to be specific.

The bonus pays a bonus for money invested even if there were no surrender charges or fees incurred with the money being invested. That being the case, the annuity must be examined without regard to the fact that the extra money could be making up for fees incurred. Why? An insurance company will not give you money for free.

How is the bonus helping the insurance company and how are they recouping the bonus money deposited into your account? Believe it, they are recouping their money. How?

Mainly it is through higher fees in the form or higher internal fees or lower caps and interest rates. Comparatively, a bonus annuity and a non-bonus annuity basically perform the same over long time periods. The longer the time period the more equal they are. The bonus annuity has its sweet spot though which is evident in the proposals you can get from your insurance agent. Just ask them to run 10 and 15 year proposals for the bonus annuity and the non-bonus annuity. Make certain they are based on the same interest rate.

To learn more about bonus annuities and recovering surrender charges read - Do Bonus Annuities Make Up For Surrender Charge Transfer Fees?

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Why You Should Be Using Annuities In Your 401k

Annuities add major benefits to 401k plans. Who should be using them? Not everyone.

If you are strictly looking for return on investment then do not use annuities in your 401k. If you are interested in learning more about guarantees then annuities could be for you. Annuities offer guarantees that are rare in the investment world and basically absent in the 401k. What kind of guarantees do annuities offer?

The first and most traditional is the death benefit. The death benefit is a guarantee for your heirs. It acts as a high water mark for your principal balance. For example, your annuity is worth $500,000 and then one year later you die when the market is down and your annuity is only worth $300,000. If your annuity has a death benefit then your heirs would receive $500,000 not $300,000. It is a great benefit to add especially if you have known health problems that are going to shorten your life span. A lot of insurance companies include the death benefit in all of their annuities. It used to be standard on all variable contracts but sometimes it is now an option.

The most important guarantee is the income guarantee. The income guarantee guarantees a minimum level of income for life. It is based on a percentage of assets and your age when you start the income stream. You do not lose access to principal like the old annuities where you had to annuitize to get an income stream. This guarantee creates a base level of income from which to plan your entire retirement. Planning becomes simple with the income guarantee.

To learn more annuity guarantees in relation to a 401k read - How Much To Invest In 401k Annuity Options

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Long Term Care Costs Eat Your Retirement For Breakfast

Every once in while I see a great article about how annuities can really help in other ways besides guaranteed income and safety. Today I read an article about long term care insurance and thought a lot about annuities and long term care.

While annuities can be a great help as far income goes for retirement they are not well suited for long term care costs unless you can add the long term care rider that a lot of annuity companies are offering now.

Long term care is very expensive and will eat your retirement for breakfast. A specific long term care policy is usually best but in some situations it can be just a good to have an annuity with the rider to pay for long term care costs. How much does care cost? From what I have researched it is anywhere from $56,000 to over $100,000 per year in some areas. Of course it depends on what kind of care you want.

Do you want to stay at home? Do you want a private room? Do you want to share a room? Do you want assisted living? There are so many options that the only real solution is to have solid plan in place to take care of the costs and then choose what you want to do when the time comes. I don't know about you but at $100,000 per year my retirement funds wouldn't last long. And my wife would pay the price by me consuming our retirement money in care costs. In fact she would probably have to go back to work...if we didn't have some sort of long term care coverage.

Learn more about long term care riders right now before it is too late.

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Which Is Better Fixed Indexed Or Fixed Interest

Fixed indexed annuities and fixed interest annuities are both very popular options for placing retirement money. Is one better than the other? All things being equal the answer is no. But all things are not equal.

The answer to the question lies in the details of your retirement plan. When are you going to retire or are you already retired? It matters because the two annuities have different purposes.

A fixed indexed annuity is designed for long term growth and then income. The keyword is growth! Your money is not invested in the market so risk is not a factor with either annuity.

A fixed interest annuity is designed for income with zero growth. It pays a fixed rate and is good for designing short term income and if your investment time horizon is short. If you are older, for instance, your time horizon may only be 5 years until you will need regular income for your annuity.

Which is better also depends on what investment they money is coming from in the first place. A step up from CD that has been rolling over interest for 10 years or more could be a fixed interest annuity. Interest would be tax deferred instead of taxable each year. If the money has no clear purpose other than savings for a "what if" scenario the fixed interest annuity is great place stow away that money over time.

Which is better? Read the new article - Are Fixed Interest Or Fixed Indexed Annuities Better?

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Are Immediate Annuities Still Needed For Annuity Laddering

In short the answer is yes, no, and maybe. Not specific enough? That is because there so many variables when creating an income stream during retirement.

How much income do you need? What is the value of your current investments? Is it possible to create the income with a guaranteed income benefit rider? Is it possible to wait to activate the rider and use an immediate annuity for the first 5 years or more? Do you need regular income or are you going to withdraw here and there as necessary?

These are just a few of the questions that need to be answered for your specific financial situation. In theory, it is possible to not use the immediate annuity for your annuity ladder. Why does it matter?

With an immediate annuity you lose access to principal. They are typically used for the first 5 years of income in conjunction with an annuity ladder. Immediate annuities are also the biggest deterrent for most investors that consider the annuity ladder because of loss of access to principal. Do you want to lose access to a chunk of your principal? No way! And now you don't have to lose access to any of your principal.

Annuity laddering is the single most effective way to guarantee income in retirement at the highest possible levels. Now you don't have to lose access to any of your principal! To learn more about how annuity laddering and guaranteed income streams are created read - Fixed Indexed Annuities, Annuity Laddering, And Guaranteed Income

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450000 In Deductible Contributions To A Retirement Account

Wow! Imagine for a moment if you could deduct massive amounts of money each year for your retirement instead of just the measly 401k amounts. Imagine if you could put back your hard earned money before taxes to the tune of $250,000 per year or more or even $450,000! You could literally create your entire retirement income in just a few years versus thirty years in the 401k only plan.

What was thought impossible is now possible! The plan is called the 412(e)(3) defined benefit plan. If you have a high amount of discretionary funds that would be available for your retirement planning then consider this plan very seriously.

It creates a guaranteed income stream that is inheritable in full to your spouse or family. You won't have to worry about market volatility or how much money you lost today. You will not have to worry about your income generating assets; guaranteed annuities and life insurance are used to fund the plan.

Then when you pass away, a massive life insurance policy pays out. If you already have a life insurance policy, you might be able to cancel it as well because of the coverage build into the plan. You can also keep your current retirement plan going and retire even faster. Sound good so far?

If you want to learn more then be sure to read the new article - 412(e)(3) The Best Of Both Worlds- Annuities and Defined Benefits

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Where To Begin With Small Business Retirement Plans

Before making the kind of decisions on what investments to use in your business retirement plan like annuities versus straight mutual funds, your plan details and setup need to be decided first. It is definitely not the exciting part of starting a plan for your business. Mostly likely you are a small business owner that has finally reached a sustainable profit level or you are finally realizing that your employees will leave your business for another that offers benefits.

It can be quite complicated to get a new plan up and running. It will take some time and energy. You will also probably experience some frustrations as well. Your favorite employee may not even contribute or high paying salespeople might avoid the plan even though they might be the very employees you are trying to retain for the long run. After these frustrations and once you get the plan up and running, it is surprisingly simple to maintain.

If you are a business owner right now I cannot express enough the importance of a having a plan in place for you and your family. It is true that you might be able to sell the business for millions of dollars but keep in mind that by that time those millions could be tied to millions in operating debt due to competition, lawsuits, or even missed opportunities to advance that resulted in a dying market. Think - vinyl records. Think - VHS tapes. Do you follow this line of thinking? No one can predict the future. A fully funded retirement plan could literally save your financial life towards the end of your business life cycle.

That said, you need a place to begin. To get started read - What Size Should Your Business Be Before Starting A Business Retirement Plan?

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The Negatives Of Annuities In Business Retirement Plans

The main complaint that I hear about annuities is the about the surrender charges. A close second is the higher fees. Each can be equally as bad if you are not invested properly. Most of the time, these complaints come from people that are invested in unsuitable annuities.

The suitability of an annuity is complicated subject that is constantly evolving. Insurance companies have implemented certain basic rules to make sure that each new annuity owner meets certain requirements but it is not enough. Insurance agents are the next step. To offer annuities to clients a person must be insurance licensed making them an insurance agent. Even if they call themselves a broker, invest advisor, or something else they have to be an insurance agent as well to be able to offer annuities.

Agents are supposed have the knowledge to be able to further ascertain if the annuity suitable for each new client. For instance, surrender charges are rarely a problem if careful income planning is completed before investing. Unfortunately, not all agents are created equal. Some do a great job and some do not.

That is why reading up on annuities like you are doing right now is such a good idea. You are the final step in the suitability process. For instance, higher fees may not be a problem for you because with an annuity you can get a principal guarantee to protect from losses like you experienced over the last few years. You can learn ins and outs of annuities. It is especially important if you are investing in annuities in your 401k or other business retirement plan.

To learn more about the potential downfalls of your annuities in your business retirement plan read - Potential Downfalls Of Annuities In Business Retirement Plans

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Do Indexed Annuities Live Up To The Hype

Indexed annuities have received a lot of hype in news. The news is slowly getting more positive as people are finally beginning to understand that stocks do not always just go up. It is amazing how deep a belief can take root even if it is irrational. The Tech Bubble popped and it still took almost ten years for people to realize that stocks and mutual funds can be very volatile. The go up in value but they go down in value. The recent volatility is a warning and a solid reminder that markets are volatile.

It makes sense in a way considering that most price changes are based on supply and demand. The more that is demanded the high the price is of the stock. It works a little like fruit at your local farmers market. If you owned a fruit stand and only had one bushel of apples you would be in a good position if you had lots of buyers. If you had thirty families trying to buy that one bushel you could raise the price significantly, perhaps even 300%!

But if you only had one buyer and they were thinking buying oranges from the stand next to yours you might want to lower the price to make the sale. The market is more complicated but basically works the same. This is some of what Facebook is experiencing with their decrease in stock price from their IPO.

Indexed annuities protect against loss and provide a good return. In other words, you will earn a good return and never have to worry about losing money again! That is where the hype comes from and it is not hype. It is actually true but there are some details.

To learn more about the details of indexed annuities read - What Are The Downsides Of Equity Indexed Annuities?

To learn more about if indexed annuities are right for you read - Are Indexed Annuities Right For You?

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How To Choose Flip A Coin Or What

When you have finally narrowed down your options to a fixed indexed annuity then you have to start making the really tough choices. Most of them are just preference choices like mustard or mayo. Some of are not.

It's a little like buying a car. With one choice you get the rear view camera but with the other you get the new Bose surround sound system. If you can't have them both you have to choose which one is more important to you. In the same instance with your annuity you have to make some tough choices.

The basis of your choices is your anticipated need. I work my clients all the time on their anticipation of future needs. Planning for the future is a skill. It reminds of one of my favorite movies, The Matrix. The Oracle tells Neo that he can't see into the future past the choices he can't understand. Well it is the same with planning your future income needs.

Choosing a fixed indexed annuity is all about your future income needs or maybe it is your current income need which is much easier to diagnose. An annuity is designed to create income at a future date or to hold money to pass on to heirs. Is your annuity for income or to pass on to heirs?

To learn more about how to choose an indexed annuity read the new article - How To Choose A Indexed Annuity.

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A House Divided Annuities In Business Retirement Plans

Divided is how I would describe current opinion on annuities in business retirement plans and annuity retirement plans. The division is well deserved. Sometimes annuities are the worst idea ever and sometimes they are the best idea ever for a retirement plan option. The difference lies in the individual most of the time. Is an annuity right for you?

Of course the other obvious factor is the quality of the annuity in the plan. High expenses usually indicate an under performing plan. To know whether an annuity has high expenses you need to compare it with other similar annuities.

The expert's opinions are usually divided because of the expense issue and the ability to make a variety of investment decisions within the plan. I tend to agree with both of these arguments, expenses and variety, until you add in the other amazing benefits that annuities offer other than just pure performance. After the other benefits are calculated in, I feel like it is an - either or position - that can end up very positive or just neutral.

Do you have an annuity retirement plan? Keep in mind we are not talking traditional pension like benefits although those are always available when using annuities. We are talking a variable annuity retirement plan with no intentions of annuitizing.

If you have an annuity retirement plan then look into the "extra" benefits of the annuity. Depending on your exact situation the "extra" benefits like guaranteed income for life without annuitizing might be the best add-on and decisions you have ever made concerning your investments. You may still be too young and if so then just keep it in mind to add in the benefits at a later date.

What are the pros and cons of annuities in business retirement plans?

For the cons read - The Cons Of Annuities In Business Retirement Plans

For the pros read - The Pros Of Annuities In Business Retirement Plans

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The Great Annuity IRA Debate Rages On

You put an annuity in an IRA? What? I can't believe the annuity IRA debate is still going on. It seems obvious to me which side is right but I am sure that the opposing side feels the same way. Does an annuity belong in an IRA?

If an IRA is tax deferred then why would you need double tax deferral by putting an annuity in an IRA? Or does double tax deferral even exist? And do you pay for it or is it free?

The debate centers around the fees associated with annuities and the double tax deferred idea. Obviously double tax deferred doesn't even make sense so the debate is really just about the extra fees of an annuity versus some other forms of investing. But those other investments have their fees as well. They might be called commissions or internal fees but they are still a cost to your investment.

A question I fail to hear a lot from the people that are fiercely debating the subject is why would you invest in an annuity in an IRA? Why an annuity versus a stock, bond, or mutual fund? Well in the old days before the tech bubble popping in 2000 there really weren't very good reasons to use annuities in IRAs.

Now a days is a completely different story. With income guarantees, principal guarantees, safety concerns, security, long term care options, and all of the other benefits that are offered inside of an annuity it makes complete sense to use an annuity in an IRA.

Learn more about it here.

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Can You Afford 16 Per Gallon Gasoline

The number one component of a solid retirement plan is making absolutely certain your income will keep up with inflation. A rising income is the only solution to make sure your standard of living does not decrease over your retirement years. No retirement plan is complete without some sort of inflation barrier. Variable annuities offer one solution to combat inflation.

Variable Annuity Mechanics

A variable annuity works much like any other annuity. You invest a certain amount of money and any interest that money accrues is tax deferred until you take a withdrawal. In a variable annuity your interest is earned by the investments you choose when you invest. The investment options include mutual fund-like choices called sub-accounts. For practical purposes, sub-accounts work exactly like mutual funds which include bond funds. The annuity usually has a fixed interest option as well.

Variable annuity contracts have surrender charges just like every other annuity unless you are working with a fee-only advisor. If so your annuity may have a very low charge or no charge at all for withdrawing money. Like all annuities you need to study the surrender charge schedule to make sure the charges will not affect your retirement income plans. Growth and income is your goal.

Variable Annuity Growth

Variable annuities are designed specifically for growth. You must have a growth portion included in your portfolio to keep up with inflation. Just think about how much gasoline cost 20 years ago. Was it about 87 cents a gallon? Your income has probably grown considerably since then. Now consider your retirement. In twenty years, gasoline will be more expensive. Will it grow to $8 a gallon? Hopefully not! Actually it would be more $16 a gallon to keep in line with how much gas prices have increased over 20 years. Could you afford $16 a gallon? The answer is yes! Why?

Growth is the answer to combat inflation. If your income is growing slightly more than inflation then your purchasing power remains the same. The goal of investing for retirement is future income. It doesn't matter that you will have $3,000,000 in assets when you retire. It matters that the $3,000,000 will produce a certain amount of income that is indexed to inflation so that you purchasing power either grows or remains the same.

To learn more about inflation and how it can erode your purchasing power read - Inflation And Variable Annuities - You May Not Be Protected!

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Worried About The Market Going Back Down

You aren't alone! But what can you do right?

Do you still remember the down years that happened just a few years ago? It is very easy to forget about the down years when the market is up. In fact sometimes it seems like they didn't even happen. An easy thought pattern to get into that can be very destructive is staying put when your investments are up and making changes when they are down.

It is a great way to manage your investments on a very specific basis but on general market moves it makes more sense to lock in your gains instead of locking in your losses. That's right, lock in your gains and not your losses. That way you never lose your hard earned investment gains.

It is an emotional battle to sell investments that are doing well in order to lock in gains. I have to battle with the idea that maybe my investment will do just a little bit better, make a little bit more, a few more percentage points and sometimes they do! But sometimes they don't. Is it worth to lock in gains?

That is a decision you need to make on your own. Fixed indexed annuities are a great place to lock in your gains each year and you don't have to sell investments each year to do so. Now is a great time to consider selling your investments that are fully recovered from the down markets over the past few years. Read more about how it works in the new article - Ending Market Fluctuations With Fixed Indexed Annuities.

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Is Guaranteed Retirement Income A Fish Story

In the past, it was a fish story. I remember when got started in the retirement business 12 years ago there was a broker in my little town that was basing retirement plans on 15% returns for income withdrawals!

I also recently heard a major financial figure head tell his audience that if you aren't getting 15% average annual returns on your mutual funds you should change brokers! Seriously? I have never met a broker that can average that amount for any given time and I have never seen a mutual fund that can either. This is especially true over a length of time, such as your retirement of 30 years, give or take a few. If he had said real estate at 15% average annual returns I would have totally agreed with him. Talk about a fish story!

Guaranteed income from annuities is not a fish story. In fact, the "lure" to the idea is very strong as insurance companies are offering a very strong product. Guaranteed income works as a percentage of your total assets at the time of activation without loss to principal. You do not lose access to your principal!

You can also get your principal guaranteed to never go down by using fixed indexed annuities instead of variable annuities. The "lure" is guaranteed income, no principal loss, and market-like returns. To learn more about planning your retirement read - Retirement Planning And Annuities.

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Inflation And The Erosion Of Your Income

I know - BORING - right? Inflation is a boring subject just because it is a future event and doesn't hold much of a problem right now. But right now is when you absolutely must deal with the inflation problem. My grandfather made 500% on the sale of his home. Unfortunately he didn't live long enough to see the results of his purchase. Why did the house sell for so much?

Inflation!

Using simple math and looking around the neighborhood at home prices it is easy to see that housing costs about 500% more than when he originally bought that home. But that's not all. Cars, food, utilities, gasoline, health care, and pretty much everything increased in price about the same amount.

If your investments are not indexed to inflation then you are losing money or purchasing power to the destructive power of inflation. It is a destructive power to fixed income portfolios. It is also a destructive power to poorly performing portfolios. Why does it matter?

Your retirement could last 20-30 years! If that is the case your purchasing power could decrease by 3-4% per year. At that rate you would lose at least half of your purchasing power during retirement. In other words if you usually get a new Caddy every year then eventually you will have to downgrade to a car that is 1/2 the price.

Or one half the vacation, one half the golf, one half the income to help at church, and so on. No you income doesn't decrease but the cost of everything increases over time. To learn more about one solution read - Variable Annuities And Long Term Growth.

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How To Create Guaranteed Income For Life

When to retire is really about income right? Sure you can work as long as you want to but you really do not have the option to retire until enough income can be generated from your investments to cover your monthly expenses and still increase with inflation. Until you reach that point, you do not have an option.

How do you make sure your investments can create enough income on a regular basis no matter what the market does or does not do? With traditional investments, it is not possible without help. Help comes in the form of guaranteed income riders on annuities.

Guaranteed income riders can make the difference in your retirement planning and income creation. Adding a guaranteed income rider creates a baseline of income from which to plan your entire retirement. It takes the market out of play. Worry will no longer be needed. Your income will come every single month with no problems at all.

How it works is a little complicated but stick with it and it will become clear. I work with income guarantees often and still have to refresh occasionally on the details from insurance company to insurance company. Keep studying it and ask questions. If you come to a word you do not understand in the literature, circle it and ask about it.

For more details and a thorough example of how it works be sure to read - What Is The Guaranteed Income Benefit Rider?

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How Much Is Your Annuity Paying You

Good question right? Oddly enough, it is not always that easy to answer. Call your broker and ask them how much your variable annuity is paying and you will get varying answers and for good reason. Most of the time it will take a few quick calculations to get exact numbers.

Now ask for a year over year or past three year total return and your broker or insurance agent will have to call you back! It can be confusing and it takes time to get those numbers together even for the professional handling your annuity contracts. Are you trying figure out the number on your own?

You should at least know how it works to be able to compare annuity returns over time. If you were earning about 5% for the last 6 years and there is contract that is virtually identical that had returned 8% for the last 5 years it might be worth it to at least look at making a change.

If you had $1,000,000 in that contract then that is an extra $30,000 per year! That is a whole lot more golf for the year! Now consider an extra $30,000 for 20 years. That is $600,000 in interest earned or lost by not taking any action.

But the first step is to learn how to read your annuity statements and get a good grasp on how much you are earning. To learn the basics read - How Much Is Your Annuity Paying?

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Tired Of Your Low CD Rates

If you are tired of your low CD rates then perhaps it is time to start looking for an alternative investment that pays more. Annuities could be the answer!

A traditional fixed annuity holds true to the CD form and is an easy switch for the right person. A fixed interest annuity pays a set rate and has a maturity date just like a CD. Although it is like a CD, an annuity does have its differences.

First, an annuity has surrender charges as opposed to the CD's penalties. Surrender charges are much more substantial that CD penalties due to the fact that the charge is based on your total value and not just your interest earned.

Second, annuities are tax deferred and CD's are not. Annuities fall into the "taxed later" category. When you withdraw money you have to pay taxes. CD's are "taxed now" investments. If the money in question is for long term savings and not income then it is no brainer to make the change to an annuity.

Finally, annuities pay higher rates and offer many more amazing options. Compared to CD's which offer nothing, annuities offer amazing benefits. Income guarantees top the list of riders you can add to annuities that make them much more attractive. Long term care riders come in a close second.

Do you want to learn more about transferring you CD into an annuity? Read - Should You Transfer Your CD To An Annuity?

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Why Should Annuities Be In IRAs

Should annuities be in IRAs? Isn't that double tax deferral and unnecessary fees? It used to be! But that was back when the only real benefit of an annuity was tax deferral and of course some estate benefits.

Now, there are many more benefits to annuities. Consider the riders as proof. And, double taxation is not actually possible and, of course free, if it were.

The income benefit rider is a guaranteed income rider that literally guarantees your income for life no matter how the market performs. Up, down, flat, it makes no difference in your income payments. And if you are worried about losing access to your principal, it offers full principal access.

The stepped up death benefit rider is an increasing balance benefit payable on death. It moves more income to your heirs for them to be able to pay estate taxes. It works a little like a life insurance policy and is in fact the main substitute available for life insurance if a person cannot qualify for a regular life policy.

The long term care benefit rider pays a certain dollar amount for nursing or at home health care expenses. Long term care expenses are the single largest killer of retirement plans and the worst of financial risks to try to self insure.

Do annuities belong in IRAs? Yes! To learn more about why read - One Great Reason To Use An Annuity In Your IRA

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Tax Free Retirement For Business Owners

Imagine for a minute - You need $45,000 per year income for retirement but you have to withdraw $100,000 to get it because $55,000 went to taxes!

Shocking isn't it? That exact situation is what lot of wealthy business owners will be facing when they finally decide to hand the reins over to a new driver for their business. If you invest in tax deferred investments you will pay taxes when you withdraw money.

Tax deferred investments offer a tax break right now but it is miniscule compared to the growth of that investment over 20, 30, or even 40 years. It is not worth it for wealthy business owners to only use tax deferred investment vehicles. They always have their place but there are better options.

Consider this, if you need $100,000 to live on each year you will need to save a certain amount of money to make sure you do not spend your principal down thus depleting your retirement income generating assets. How much will your principal need to be? It depends on two things, your tax rate and the rate you are going withdraw each year.

For our purposes let's assume a 5% annual withdrawal with extra earnings left in the investments to increase the principal value and assume a 45% tax rate. Taxable income first, $100,000 in spendable income needs to come from a $181,818 withdrawal. You need to withdraw $181,818 to get $100,000 that you can spend. The rest goes to taxes. The principal value needed for $181,818 dollars to equal a 5% percent annual withdrawal is $3,636,363.

Contrast those numbers with a tax free investment vehicle. To get $100,000 in spendable income you need to withdraw $100,000. The principal value needed for $100,000 to equal a 5% annual withdrawal is $2,000,000.

If you are saving in taxable accounts you need to save $3,636,363 and if you are saving in tax free accounts you need to save $2,000,000. That is $1,626,363 less than the taxable account.

What does the lowered savings requirement mean to you?

You can retire earlier. You can retire with much more income if you decided to keep working after your possible retirement date due to your retirement savings being complete. You can have your retirement savings finished much earlier in life to create choices, choosing to keep working or to live your passions. And last but not least, you can create much more wealth for your heirs and your legacy to your family.

For more on tax free business retirement ideas read - Business Owners And Tax Free Retirement

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No Market Fluctuation and More Income

Double or triple your income?

Not too long ago I was reviewing an old case file. Most of us agents and advisors keep at least one folder full of all of those prospective new clients that got away. That is to say they didn't like what we had to offer at the time. Or more likely for some reason or another we just couldn't communicate well enough to build enough trust to move forward at that time.

A few years go by and looking back I can see things that I didn't at the time. I have been in the retirement business for 12 years now studying day in and day out and still learn something new almost every day.

One prospective client in particular just couldn't wrap their brain around doubling their income stream in just one month. In their mind a doubling would take ten years. The answer isn't always more principal or higher interest rates. Sometimes it is experience and technique!

Experience says that a person with more knowledge and wisdom (not necessarily years) in a very specific area might be able to open your eyes to a new horizon's colors and hues.

One little understood horizon is using annuity laddering to double and triple retirement income streams. It isn't a new horizon but it takes a well seasoned advisor to understand the amazing benefits and be able to translate those benefits into a relevant and actionable plan.

To learn more about how annuity laddering works be sure to check out the new article - Does Annuity Laddering Really Work?

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Move Money Out Of The Market

It may seem like a strange topic to some people with the market up right now. But now is the time to talk about it! Do you really want to go through another downswing in the market? Most people have finally recovered all of their losses from the past market volatility and even made a pretty good return by now. The real question is - now what?

Now that you have weathered the down markets and things are better what can you do to make sure it doesn't happen again? Don't fall into the crowd, breathe a sigh of relief, and try to pretend the down years never happened. Now is the time for action!

If you want to find some alternatives to being at the whims of the general stock market then you are in the right place to begin your search. Annuities can be the answer by offering guarantees. You can still be in the market or in something that provides market-like returns and have guarantees. How does a guaranteed income sound that grows each year no matter what the stock market does until you start taking money out? Interesting?

Guarantees may not be the answer though. After all, when you purchase something you hope you NEVER have to use the guarantee. That means that your purchase has malfunctioned in some way and no one wants that to happen.

Fortunately annuity guarantees are not like that. They are very good and ensure you have a base line of income to plan from in retirement. Think of it like a safety net in case the output of the product - the interest earned from market growth- is not enough to live on.

For more about alternatives to the market read - Annuity Strategies - Should You Tie Even More Money To The Market?

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Variable Annuities In An Election Year

If you have owned a variable annuity over the past 10 years you have been on a major roller coaster ride! The market was up and down and down and now it is up. But with gas prices so high and an election coming, how long do you think it will last?

When do you pull the plug and find some safety in your investments? It could be now! Or not depending on your own personal political beliefs. For me it's not just the election year but the prices at the pump. High gas prices slow down consumer spending which tends to lead to down or slower markets.

Either way now is a good time to take a look at your variable annuities and make some decisions. Maybe this is the year you 1035 exchange your variable annuities into indexed annuities so that you never lose money again and still have the ability to earn a good return. Or maybe now is the time to reduce your risk in the market by pulling back on your most aggressive funds or stocks.

There is no shame in wanting some safety in your portfolio. You should never risk your retirement income generating assets. If your variable annuity is not part of your income generation then you probably don't have much to worry about.

If you want to learn more about your variable annuity and how it works read - What are Variable Annuities?

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Is An Annuity Right For You

Good question! You need the answer before investing.

Annuities are a great investment. They offer so many great benefits that other investments do not offer. On the fixed annuity side they offer safe, secure, reliable investment options. They also offer guaranteed lifetime income and tax deferral until you are ready to start taking that income.

Annuities can also be your worst nightmare! With high surrender charges and each withdrawal taxed at earned income there are definitely reasons to be careful. That is why you must be certain that an annuity is right for you before investing.

Be careful! But don't rule out the best investment on the market today. Why do I think they are the best? Guaranteed income is by far the best option on the market today for retirement money.

Guaranteed income adds a level of safety that previously did not exist in retirement planning. Guaranteed income allows you to plan based on a minimum income. Instead of some random number that you and your advisor choose you now have a guaranteed number to work with from the start! Your investments should perform over the guaranteed figures but just in case we have a few down years right before you retire you will still be safe. More importantly, you will still be able to retire on time!

To learn more about how annuities work and if they are right for you read - Is An Annuity Right For You?

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SEPs or SIMPLEs Making Plan Decisions

When you start looking at retirement plans for your small business you will probably arrive at the decision that either the SEP or SIMPLE plan is going to work best for your situation. Unless you already own a large business with many employees one of these two plans usually works best.

Then you are going to have to decide which plan provider to use and what kind of investments to offer in the plan. Do you want to offer annuities, straight mutual funds, or both?

Offering fixed indexed annuities is the best option but not always reasonable depending on your situation. Fixed indexed annuities offer income guarantees, principal guarantees, and inflation protection. What could be better? Sure, there are arguments against these products and in some situations I would agree completely.

It is a tough argument to argue against the income guarantee in the fixed indexed annuity. I have seen enough clients lose money at the start of their retirement to know that it is a bad situation. Even two or three down or flat market years in a row can spell big trouble for those people that have "just enough" money to retire.

Then there are the people that build new houses or have other big expenditures right when they retire which makes a down year or two even more detrimental. Waiting to spend the money is not always possible if commitments have already been made. It is better to have guarantees in retirement. Once you get to retirement it is better to not lose than have high potential for gain when the consequences of losing are detrimental to your retirement plan and might even cause you to need to go back to work.

Fixed indexed annuities are the way to go but annuities don't always work in retirement plans. To learn more about the SEP, SIMPLE, and annuities read - Which Is Better For An Annuity - SEP Or SIMPLE?

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Losing Sleep Over Your Annuity

Maybe it isn't that serious yet but you might have a few concerns. Should you keep your annuity? Is it paying enough? Is a fixed rate still the right thing to do? Is it time to cash out of your variable annuity? Is the market going to hold up? There are so many questions and even more answers.

If you have questions and concerns, now is the time to ask. The market is up which is when moving a variable annuity is optimal timing. Rates are still low but if you are in an old annuity, 5 years or more, your rates could be even lower.

There are lots of new benefits as well. Guaranteed income riders, long term care riders, lower fees, and indexed annuities are just a few of the new benefits. Not to mention higher rates, better performance, and sometimes you can even get principal guarantees.

Even with all of the new benefits it still may not be a good time to transfer. Moving an annuity is a little like selling your house in that you are going to be stuck in the new annuity for while. When you invest in a new annuity your surrender charge schedule will start over. It's not a big deal if you are not using the income from your annuity and not planning on taking lump sums either. (On a side note, if that is the case then there are better places to put your money!)

To learn more about when transferring your annuity is good idea read - When Is It Time To Transfer Your Annuity?

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Nervous About Your First Annuity

Your first annuity purchase is oftentimes confusing and worrisome for investors. Annuities are long term investments and unless you are a natural long term planner you might be a little nervous tying your money up for 10 years or more. If you are investing for the right reasons it should not be a problem but your nervousness is understandable.

Investing in long term investments requires a bit of different thinking that when you were putting monthly amounts back into your 401k or other retirement accounts. It is more like buying a house than mutual fund, stock, or bond. There is more paperwork and it is a more permanent investment. Some solace should come from that knowledge. You will no longer have to make investment decisions on the money you are considering putting into the annuity.

Now consider that you are likely going to add the guaranteed income benefit rider to your annuity as well. Not only will you not have to make decisions on the annuity but you will also, as long as you follow the rules, never have to worry about where your income is going to come from again.

But what if you want to move your money? Unfortunately, annuities have high surrender charges and moving your money will be difficult without incurring high fees and penalties. One option is to move the free withdrawal amount each year, usually 10%. During this time you could use your other investments for income. Or maybe just using the entire free withdrawal amount would be just a good while using your other investments a little less.

Are you still nervous about your first annuity purchase? Read - Your First Annuity

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Variable Annuities Or Mutual Funds

The real question is to be taxed now or to be taxed later? I choose later but in some circumstances now is better. Tax free is always better than taxable so choosing between two taxable investments is a little difficult but sometimes necessary.

Which is better - a taxable mutual fund or a tax deferred variable annuity? There are so many angles to go at this question it would take a 10,000 word essay just to cover all of the points. From an estate planning point view to just straight performance the answer to the question becomes an enormous debate.

For example, mutual funds perform better than variable annuities. Or do they? Consider that the subaccounts the variable annuity may be much smaller in total asset value and be able to move in and out of stocks in a more nimble fashion thereby cashing in on the ups and cashing out on the down markets much faster than a larger fund. But...

Tax deferral is a good deal or is it? It is and isn't. Consider the fact that you will pay taxes at earned income upon withdrawal of your money versus capital gains each year with the fund. If you never need the money then paying taxes each year is overkill however in the annuity the tax consequences to your heir could be much higher. And...

There are at least 100 arguments one way or the other. The key is to fine tune what you need the investment to do and then pick the one that works best for you. For more read - Are Variable Annuities Better Than Mutual Funds?

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100000 Bonus Are You Sure

Bonus annuities offer some amazing benefits including a very lucrative bonus!

If you invested $1,000,000 and received a 10% bonus that is $100,000 added to your contract value just for investing! Wow!

But you might want to gently press, not slam, on the brakes for just a minute to learn about the bonus before getting too excited. Unfortunately there are a lot of details that go along with the money. If you keep a cool head and do your best to make sure the bonus annuity works for you the bonus can be yours!

What are the details exactly that go along with the bonus annuity? Time invested, withdrawal limitations, cap rates limitations, fee enhancements are just to name a few. It might seem like a short list but the magnitude of the list should be felt before moving on. Read it again!

Understanding all of details must be completely understood before investing in the bonus annuity. Why? How about losing your entire bonus before being able to access it? What about avoiding a 15% surrender charge? What about enhanced fees that eat away your return and basically eating your bonus before you get a chance to use it? What about cap rates so low that your earnings are limited so much you are basically losing interest that you could have been earning?

Seems a little negative right? What you are hearing from me is caution and not negativity. I use bonus annuities all the time for my clients when the situation is right. They love them! Why? They understand how they work and why they are using them for their retirement.

Take a look at the new article - What Is A Bonus Annuity? - to learn more.

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Bonds Or Fixed Indexed Annuities

I have worked with investors and their bond portfolios for years. There are two major problems that don't really seem to have answers when working with bonds.

Number one you have no control over interest rates. If rates are good then great if rates are bad then not so great and there is nothing you can do about it.

Number two you have no control over your bond values. When rates go up your bond values will go down. There is nothing you can do about it. And yes I am one of those few advisors in the world that believes that when an investment is down it is lost money even if you don't sell it yet.

If you have a large bond portfolio let me tell you that when rates go back up for real your bond values will go down. There is nothing you can do about it. Or is there?

Fixed indexed annuities offer a great alternative to bonds. They have a fixed rate option that is close to most bond rates right now and they are tax deferred. More than that they have what I call a "superpower" option.

You can change them without selling or losing money in commissions and losses. You can change them from earning a fixed interest to earning interest based on the market. All of this while taking zero risk since your principal values never goes down. You can take advantage of an up market with zero principal risk. You can't do that with your bonds! Selling after rates go up means losing money!

To learn more about how it works read - Are Fixed Indexed Annuities A Good Replacement For Bonds?

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Fixed Indexed Or Variable

I get asked this question a lot. Is a fixed indexed annuity better than a variable annuity? Some people would say yes! I say - MAYBE. It depends on what you are using each annuity for in the grand scheme of things called your retirement.

If you are looking to retire soon and cannot afford for your principal to fluctuate or go down then a fixed indexed annuity might be better. And a fixed indexed annuity might offer an income guarantee as well.

But if you are several years from retirement or several years from even remotely needed money from the annuity then perhaps a variable annuity would be better for you. You could take advantage of the higher potential growth.

Most annuity decisions are about timing. When do you believe you will you need make withdrawals from your annuity for your retirement income or to supplement your retirement income? The answer to that question definitely leads the way to which annuity is best for you.

A lot of investors and new financial advisors have learned the hard way that your income needs are what drive your investing needs. The investment itself is only a tool to get you to your goals. If you use the tool correctly then you will succeed. If not then you might not succeed in your retirement.

Be sure to take a look at the new article that compares Fixed Indexed and Variable Annuities in more detail. Which is better? You decide.

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When Are Annuities Appropriate

In insurance-ese we call this question suitability. When are annuities suitable for someone to put a significant amount of money into them? To answer that question we need to know a lot of details.

There is a general recipe that a lot of insurance companies are using now for suitability. The main things they want to know are your investment time frame and what percentage of your assets does the annuity money represent. Makes sense right?

No one should ever put all of their money into one type of investment. With annuities there are exorbitant surrender charges as well so your investment timeframe is very important. Would you use an annuity for a short term investment? No way! Surrender charges could take 10% or more of your investment money.

Should you invest long term money into annuities? With a ten year time frame you could have lots of interest growth and maybe even zero surrender charges when you need to take money out of your annuity.

The real question is when should you use annuity if you meet the suitability requirements? If you are working with long-term money and not investing your entire nest egg then when is an annuity right for you?

It is still a very detailed question and will be different for every single person. I have written about the basics in another article called When To Invest In An Annuity. Check it out before you invest. If the descriptions sound like you then be sure to look into the idea further.

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Avoiding Horrendous Surrender Charges

Sometimes the horrendous charges associated with some annuities are a major downside of owning the investment. Who wants to pay 15% in penalties just for access to your own money?

Well it isn't that bad. I asked that question like that because a lot of the times that is how new annuity investors see the charges. Since annuities are for the long term they do not belong in the short term moving money around segment of your investment portfolio. Annuities are for long term income and long term growth.

I always emphasize to my clients that annuities are long term investments that they probably won't ever move or sell. Because they do have surrender charges they are the last investments you want to use when you have an emergency. Always use short term investments and investments with no surrender charges or commissions first.

With careful planning you can avoid the surrender charges altogether. You can have lifelong income without worry of steep fees and penalties. Using your free withdrawal each year is only the beginning. How do you make sure you don't have to go over your free withdrawal?

Surrender charges can be horrendous! Careful planning can help to make sure you never have to pay those charges. But if you do need to get into your principal that is not free of surrender charges then at least you have a contract telling you exactly how much it will cost you which is something you do not have with any other type of investment.

To learn more about how to avoid surrender charges read - Avoiding Surrender Charges With Careful Planning.

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The Dreaded Surrender Charge

Surrender charges are a dreaded by most investors. The topic is also dreaded by most advisors! Annuities are such great investments but they come with surrender charges. How do you overcome the high charges to withdraw money?

The answer lies in careful income planning and knowing what you are getting into in the first place. Always carefully examine the annuity documents before investing. It is very tempting just to trust your advisor and not try to understand the contracts. That is as big mistake.

It is not that your advisor is not trustworthy; it is that communication can never be 100% accurate. When people speak we hear what we hear through a biased filter of our own experiences. We also speak through a biased filter of our own experiences. Therefore, communication is then never 100% accurate and the details of the contract should be thoroughly studied.

Now add in that your needs may change over time. How much income you need today may change ten years from now and what about twenty years from now? Your advisor could retire or even be out of the business by then but you will still have your annuity. It is vital that you understand how it works and how the internal components relate to each other.

To overcome the surrender charges you need to understand how they work.

To get a better understanding read - Why Are Surrender Charges So High?

To understand more about surrender charges read - Why Do Annuities Have Such A Bad Reputation?

And to learn how to avoid surrender charges altogether read - Avoiding Surrender Charges Through Careful Income Planning

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Funds Or Indexed Annuities

Judging but the indexed annuity sales numbers a lot of people are choosing indexed annuities over funds. Why? Good question!

The simple answer is safety and the possibility for market-like returns. Mutual funds can lose value and fixed indexed annuities never go down!

Don't get lost in the high markets of right now.

People tend to forget the down years when the market is up like right now. Mutual funds can go down and will go down when the market goes down. Fixed indexed annuities go up with the market but not down with the market. And even better they have guarantees that can be added.

Imagine a guarantee that grows your income base by 5-7% each year until you start withdrawing money for retirement. Imagine that same guarantee in retirement for the down years. Now imagine the guarantee that pays you 5% of your principal amount each year no matter what the market does. It is guaranteed to pay each year even if your account value goes to zero.

What happens when your mutual fund values get to zero because you have withdrawn all of the money for retirement income? If you answered NOTHING then you are right! In the fixed indexed annuity with the income guarantee you would still get your same income for the rest of your life!

Of course there are details but it is worth looking into. To read more about the differences and a comparison between mutual and fixed indexed annuities read - Are Indexed Annuities or Mutual Funds Better?

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Money Money Money

All investments are designed to either one or both of two things - build or hold wealth. Eventually you are going to need to create income from your vast investment empire!

Annuities are a fantastic way to create that income. In fact, there more money you have the more you should be using annuities to create that income. Think of it this way. Would you rather keep your $3,000,000 you have saved for retirement or risk losing 30% of it in one year in a fluctuating investment? In other words, are you willing to risk losing $900,000 in one year? If not then annuities should be your primary safety net.

But how do you earn income in annuities? Good question. Basically there are two ways which are a fixed interest rate and a variable interest rate. A fixed rate speaks for itself but a variable rate has a few aspects that are not immediately clear.

You can lose money in an annuity if you do not pay attention to the differences!

Variable rates come in two forms with a lot of details attached. There is a variable annuity and a fixed indexed annuity. Although there are ways to make sure you do not lose money, the variable annuity fluctuates in value and in interest. In other words you can lose money in a variable annuity due to market fluctuation.

In a fixed indexed annuity only the interest paid each year is variable. In other words it does not fluctuate with the market. If you want to learn more about how you get paid in a fixed indexed annuity then be sure to check out the article that I posted called - How You Get Paid In A Fixed Indexed Annuity.

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Locking In Gains Versus Letting It Ride

Today the market was up overall about .50% or one half of a percent.  That is a pretty decent return for one day. What if the market is up another half percent tomorrow? Is it time to lock in gains or just let it ride? It is a tough decision unless you make it a non-decision.

If you are in a variable annuity or any other variable type of investments there comes a time when you need to lock in your gains or just let it ride and hope for more gains.  It is critical to get it right because a wrong move could be months or years with no returns or a declining investment with no hope of recovering.  A right decision could leave you in great shape. Imagine owning 50,000 shares of Microsoft 15 years ago or McDonald's 25 years ago.

Not everyone can be so forward thinking or is even willing to risk in brand new start-up companies to win that big.   So we invest in mutual funds and well known stocks.  The same decision comes with those investments as well.  As some point it will be time to lock in the gains or just let it ride.

While your mutual fund probably won't do as well as Microsoft stock did the decision is just as important to your future.  How would you like to make it a non-decision? How would you like to lock in your gains each year and never worry about losing them or your principal? You would also have market like returns!

A fixed index annuity locks in gains each year.  That means that whatever you earn you can never lose it and whatever your originally invested can never be lost either.  You can invest in international indexes as well.  It is a great way to invest aggressively and not be at risk of losing money.

Admittedly, annuities get a bad reputation. Before investing be sure to learn why and also learn about what to look for in an annuity.

Lock in your gains or let it ride?   Why not both?

Annuity Death Benefits

No one likes to talk about their own demise. Unfortunately, it is going to happen. When it does, your assets are going to pass to your heirs one way or the other. They can go through probate and be broken up however the court decides or they can pass directly to the people of your choice. You can let your heirs worry about the taxes or you can help them out by creating cash for them to pay the taxes on your estate.

Annuities can help avoid probate and create some extra money to pay the estate taxes with when the time comes. Annuities have beneficiaries attached to them. Like your IRA, they pass directly to your heirs. When they do, like the IRA, they create a tax problem.

It is obvious that annuities are not the best estate planning tools. Life insurance does a much better job of passing money to heirs but it is not always appropriate especially if you were planning on using the income from the annuity. Taxes are a problem for whoever inherits the annuity proceeds.

You can help a little. By adding the optional death benefits that annuities offer you can increase the death benefit to provide extra cash for your heirs when the time comes. You would be glad you did...if you were around to see the benefits.

What you would see is your heirs enjoying their inheritance. It will make their lives easier for a time for most. For some, they will use the extra money to plan their own retirement or open a business that will pass on your legacy to your grandchildren and great grandchildren.

If leaving a legacy is important to you then be sure to read - What Is The Death Benefit Rider?

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Down Market Preparations

Obviously, the market is not down right now. Well, it was down a little bit today - Monday the 25th. No one likes to hear about down markets with the markets are doing well. While they may be performing well now, consider the not so distant past of losses and worries. This is also an election year which brings up even more concerns and as we get closer you should expect volatility.

Why worry about volatility now? Because when the market begins a downturn or becomes volatile it is too late to make changes to avoid losses. You see what happened and not what is happening in the market. The indexes track changes that have already occurred. When you get home from work or happen to flip on the news and see a 1,500 point drop in the DOW, it is too late to make significant changes in order to avoid losses.

The only way to avoid losses is prepare in advance of down markets. Advance preparation is prudent in financial matters. Prepare now or be content with losses in the next market drop. There are options to variable investing that can take the major sting of losses off of your list of risk associated with your retirement accounts. Annuities can help prevent losses and guarantee income.

To learn more read - Safe And Secure - Annuity Retirement Plans

And also - Income From Investments In A Down Market

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Learning About Annuities

Annuities are a great investment. They can be a little intimidating at first because there are so many annuities to choose from and so many insurance companies offering annuities. It does not help that most insurance companies use insurance jargon to name the annuity.

The good news is that annuity confusion is easily cleared up once you understand the basics. There are only four kinds of annuities you need to worry about. The first is a variable annuity. A variable annuity is invested in the market. The second is a fixed indexed annuity, also called an equity indexed annuity. A fixed indexed annuity is not invested in the market but offers market-like returns with zero risk of loss. The third is a fixed interest annuity or just a fixed annuity. It pays a fixed interest rate a lot like a CD. Fourth, the immediate annuity is not complicated either. True to its name, it pays an immediate income for a set period of time.

Of course, all annuities have many details associated with them. Basic knowledge of the simplicity of each basic account will help greatly when trying to understand the rest of the details. From the basics, each contract has its own benefits or options as well as its own rules and regulations.

To learn more about the basics of annuity investing read - The Different Types Of Annuities

Also read - What Are Annuities? Fixed, Indexed, Variable?

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Implementing A Business Retirement Plan

Are you thinking of implementing a retirement plan for your business?

Do you want to know more about the plan you already have in place?

One great source that I use often with clients is the Department of Labor publication - Choosing A Retirement Plan Solution for Your Small Business. Choose the printer friendly option to make it easier to read even if you do not print the document. In the DOL publication, each type of plan is discussed at length and simple explanations are given. If you are starting a plan now or already have a plan in place, the simple explanations will clear up much of the confusion.

You can also take a look at the IRS online publication entitled - Small Business Retirement Plan Resources. Each heading on the page is a detailed answer session for tough Business Retirement Plan questions.

I believe in going to the source for answers to my questions. Believe it or not, retirement plans are actually tax law. They are designed to defer tax liability and provide incentives for people to save for retirement. Notice the term - defer. You will not get out of paying taxes on your income. That is avoidance and unfortunately is illegal. But deferring your taxes is legal and a great way to save for retirement!

If you have already starting the process or are thinking about starting a retirement plan for your business it is very helpful to get a good grasp on why you are willing to start the plan. It will cost you money but it will also save you money. Are the up-front costs worth the trouble? Is a matching contribution plan really worth the business income it will take to keep it up and running?

To learn more about why you want to start a plan now read - Why You Should Implement A Retirement Plan For Your Business

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Annuities And Retirement Woes

Every day I speak to more and more people that are just out of luck when it comes to retiring on time.  Retire on your current income? No way. It saddens me to have to tell people that when they are so close to the "normal" retirement age.  It always better to know the truth and work from a solid base of truth when it comes to your finances and especially such an important event as retiring.

Retirement is about money.  You can retire as soon as you have enough income coming in or at least available to cover your expenses and your play money on a monthly basis plus an emergency fund.

How do you know when you have enough? If you have income investments just add them all up and check them against your income needs. That one is pretty simple. If you have a lot of stocks or mutual funds it is not so simple.

Investments that do not automatically produce income are counted differently.  I would use a round number of 4% or preferably less.  That means that 4% of your mutual funds and stocks is what to expect to be available in income.  In recent years 4% is asking a lot so let me clarify a bit.

You should not take money out during down years in the market unless absolutely necessary.  What? No income at all? The answer is no but it isn't really practical in most cases.  How do you solve the problem and make sure you never run out of money and that you can create the income you require?

Lifetime income benefit riders on fixed index annuities will do exactly what you need them to.  They will guarantee a percentage of return in retirement making planning very easy.   Consider how much it would help to know exactly how much you will get paid and know that your income will never go down.  Most are even inflation protected. Be sure to do your research and learn more about annuity basics before investing.

Take a look! You will be glad you did.

Consumer Spending Down In China

Could that even be possible? I was reading an article on Bloomberg.com today called Consumer Spending Fades In China. It was talking about how China's consumer spending has fallen over the past two years. Makes sense doesn't it?

How much does China export? Go to a local Wal-mart, Target, or any store for that matter and see how many products are made in China. I did it today at Target. No, I didn't read the labels on every product in the whole store but I did a small unscientific sampling.

My results: 8 out of 10 products were made in China. Kind of makes sense right? United States economy in trouble, China suffers. It always takes a year or two for those kinds of economic results to show up so what we are seeing is actually a two year old spending slowdown around the world. Now it finally shows up in China. It might be time to cut back on international mutual funds with high concentration in Chinese consumer stocks.

Or you could always just invest in fixed index annuity and be worry free. You can invest in the indexed options that are international and just in case the market drops because of China's problems or anyone else's problems you would be worry free and protected! An indexed annuity never goes down and your earnings lock in each year. You can increase your income with annuity laddering and then invest more aggressively without fear of loss.

A lot of people also have a lot of concerns about commission and withdrawal penalties for annuities. Be sure to understand how it all works before investing.

Take a look. You will be glad you did.