So for part five of this series we are going to focus on a permanent stream of income that will never run out specifically Fixed Indexed Annuities or FIA for short.
Preserving Income with an Annuity
A question and concern that is often raised especially for the baby boomer generation is what if I run out of money? To that I say, one of the easiest ways to preserve your income is to have an annuity. Another term that is better understood is Pension Plans. Annuities are the products that were often used to guarantee pension income back when defined benefit plans were popular among private employers.
These days, according to Yahoo.com, in 2019 there were only 14 companies that were Fortune 500 companies, that offered pension plans. This is why we say most employers don’t offer that same guarantee of lifetime income after retirement as they once did, you can create it yourself by purchasing your own annuity—most notably, the fixed index annuity.
Three Benefits of a Fixed Index Annuity
For many retirees, the only way to ensure they get a lifetime’s worth of income out of their savings is by having an annuity. But a lifetime income isn’t the only benefit you get from a fixed index annuity. You can also enjoy more upside potential than you would from a fixed product, since fixed index annuities allow you to participate in a portion of the growth of the chosen indexes. Even better, they provide principal protection by ensuring you don’t lose money when those indexes fall—they even lock in the gains that you’ve made. And also, depending on what company you utilize, there is a potential for a bonus as high as 35%. So, consider the benefit of getting a 35% sign on bonus just for setting up a Fixed Index Annuity (FIA).
Guaranteed Annuity Income
When you design your fixed index annuity, you have the option to add a guaranteed income rider. This is a mechanism that allows you to begin taking an income at some point after purchasing the annuity. The amount of the income is dependent on the date you begin taking it and the amount is locked in for life— which means you will continue to receive the same income payment long after your principal would have otherwise been depleted.
Long-Term Care Benefits
With nursing home expenses averaging as much as $8,145 per month in 2022, according to the article on theseniorlist.com, it’s not hard to imagine your entire retirement savings being depleted as soon as you need long-term care assistance. While long-term care insurance offers some protection, the cost of the premiums can quickly erode your income, leaving you struggling every month to make ends meet. With a properly structured annuity, instead of using your income to pay for long-term care insurance or expenses, you can rely on the annuity for long-term care expenses only if you need them— if not you can use the annuity for income and even pass on the remainder to your heirs.
Annuities are one of the few solutions for income preservation that offers you principal protection, locked-in gains, and can help you save on your longterm care insurance expenses. They are a great income preservation solution when designed with your needs and goals in mind.
Next week, in the final installment of the INCOME PRESERVATION SECRETS series, we’ll talk about some of the ways you can adjust your lifestyle in order to avoid overtaxing your income.