Half Right – Half Wrong
“Americans should convert at least half of their retirement savings into an annuity.”
source: US Treasury Dept.
An annuity pays out for as long as you live. They are also insurance against general stock market declines and poor individual investment decisions.
J. Mark Iwry, deputy assistant Treasury secretary, recently announced that the Obama administration wants to “make options for annuitized income more attractive than lump sums” There is a serious problem whereby Americans are running out of their own money as they get older.
“There is a lack of financial education about the benefits of annuities and what’s available”
Source: US Government Accountability Office
RETIREMENT PLAN SAFE CONCEPT
Many clients near retirement with most of their retirement accounts in the stock market, mutual funds, managed accounts or managed accounts with their employer 401k or similar products in their IRA’s. Many times they are unaware of the costs associated with these products. A recent article published by BrightScope explained the costs associated to management fees range from .35% to 1.3% in smaller accounts. The larger accounts have the lower fee structure. Others have been as high as 4.8%
Managing these fees is very important as they can cost, (in fees only and not considering market risk) the account holder thousands of dollars in shortfall; the smaller the account, the higher the fees and greater short fall to the account.
With this being stated, we offer another alternative we call, Half Right-Half Wrong. This can cause your head to spin until you analyze the concept.
By placing half of your account assets into a safe option which will not lose principal, be subject to market decline, share in market increases with different strategies, provide guarantees such as 7% rollup, death benefit of the rollup, guaranteed enhanced benefit if you should become unable to perform the standard ADL’s (not a Long Term Care Policy but uses the same ADL’s), guaranteed payouts as a lifetime benefit, you can count on that half of your account to protect your retirement. In ten years, your account will almost double at 7%.
Now, you can use the other half and take more risk if you desire. If your portion falls drastically due to market correction, the safe half will allow you to retain your life style, you are only Half-Wrong. If your half goes up, the safe half will share in a portion and rise also depending on the option you choose but can’t lose principal, and now you have the Half-Right and both win.
This concept has been used over the last fifteen years and has saved clients thousands of dollars and peace of mind. Many only suffered minor losses in 2008/2009 as others lost upwards of 50%.
The only cost to maintain the benefits is up to 1.30% for the chosen benefits and the contracts are safe. This is an insurance annuity as is social security (a government annuity) but with bells and whistles. See a sample of a unit behind this notice.
Our Real Life Example
Here is what this approach looks like using the Half Right / Half Wrong approach:
Put 1/2 in an Annuity and take income off the other half, letting the Annuity grow.
when the liquid 1/2 is exhausted you have what you started with and can now
turn on a lifetime income stream.
Start with $1,000,000