Living 50 Plus - June 2020


JUNE 2020 C7




addition, annuities avoid the costs and delays of probate and will go directly to the beneficiaries designated by the client. A deferred annuity allows the earnings to grow tax-deferred which means that you don’t pay taxes on the money until you withdraw the funds. Once you start taking out the money, you’ll only pay taxes on the portion of the investment that is considered earnings. You’d be taxed at your ordinary income tax rate. There are several different types of annuities, some will provide an immediate income stream and others will offer unlimited long-term growth potential. A Single Premium Immediate Annuity allows you to invest a lump sum of money which can guarantee you immediate income that will last throughout your lifetime. Actuarial tables which are sophisticated methods to calculate life expectancy are used to determine the amount the insurance company will pay for either a specified time period known as “Period Certain” or one of several options based on who is to be covered such as you or both you and your spouse. For example, a 70 year old male puts in $100,000 for a 10 year period certain and life. The monthly income stream will continue for the next 10 years. If the client dies within those 10 years, his beneficiary will continue to receive the payments. If the client lives beyond the 10 years, payments will continue for the rest of his life. You can set this up to include your spouse too. As long as one of you lives, the payouts will continue.

conservative investor who wants to know exactly what the rate of return is for their investment. These are similar to a CD at the bank where the funds are locked in for a period of time that the client designates. But unlike CD’s, interest grows tax deferred. Rates are around 3% right now. Clients can withdraw up to 10% to 12% of the funds per year depending on the company with no penalty. Once withdrawals are made, earnings are taxed at your ordinary income tax rate. Just as a CD has surrender charges if you take it out early, so does a fixed annuity. For those of you interested in keeping your tiptoes in the market yet want to protect your principle, a Fixed Indexed Annuity may be an opportunity for you. Your funds are not directly exposed to the risks of the market or individual stocks. Rather interest is credited to your account by tying your funds to an index such as the S&P 500, the Dow, 10-year Treasury Bonds, etc. The interest earned is credited on each contract anniversary date and are “locked in”. The interest earned cannot be lost due to market downturns so once interest is earned, it can never be taken away. If the index goes down at the end of the contract year, the interest will be 0%. For example, if your investment makes 8% in year 1 and 5% in year 2 with an upward trend in the index, then slides in year 3, you maintain the interest that you’ve already earned in the first 2 years; you just earn 0% interest in year 3. You’ll lose nothing based on a falling market as you’ll maintain 100% of your principle as well as all your interest already gained.

These generally will run for terms from 5 to 16 years. At the end of the term, you can decide if you want to roll it over and continue or want a monthly income stream. Again, these will allow up to 10% of the account to be withdrawn each year during the initial term and there are surrender charges if you need to withdraw more than that in a year. If you are diagnosed with a terminal illness or enter a nursing home, the surrender charges are waived. For clients over age 70 ½ with IRA funds, the required minimum distribution is part of your free withdrawal for the year. Some fixed annuities and indexed annuities also offer guaranteed lifetime withdrawals of 8-10% for as long as a husband or wife may live. Some also contain beneficiary amounts at death. Some others combine annuities with a Long Term Care plan. You put the money in the account and it triples or quadruples if used for Long Term Care and goes to beneficiaries if never used. With any of these types of annuities, your principle is protected. If you are tossing and turning at night as the market rides a roller coaster, you might want to diversify your portfolio and seek some protection for your hard earned savings. There a lots of different options for annuities. Just talk to your friendly insurance agent or give Rebecca Nordquist with Phares Financial Services a call at 308-532-3180 or email at I’ll be happy to visit with you about your options.

By Rebecca Nordquist, RD, MHA, CLTC

Have you been watching the volatility of the stock market in the past few months? Is it making you nervous as you watch your life savings go through the meat grinder? Your goal was probably to accumulate enough wealth during your working career to allow you to enjoy the lifestyle you want in retirement. Once you have it saved, most people want to ensure that preserving their capital is a top priority. If paying attention to the financial markets is keeping you from sleeping at night, you may want to review your financial portfolio. Tucking a portion of your savings into annuities can be a safe haven from market volatility since it preserves your principle. An annuity is basically a contract sold by an insurance company that invests your premium for future growth. Once you’re ready to withdraw money-usually for retirement income-the insurance company will distribute regular payments that can last for a lifetime. In

A Fixed Annuity is designed for a


Made with FlippingBook Publishing Software