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Retirement

Income

Is Your 401k Enough To Last?

Retirement peace of mind comes from knowing your income is secure, your investments make sense, and you have a plan that you understand and believe in.

Couple Planning — IQ Wealth Management®

Meet Tom & Becky

Tom, age 60, is an electrical engineer for a Phoenix area high tech firm. He went to work right out of college and began contributing to his 401(k), reaching a value of approximately $950,000 recently.

Because he is retiring in the next few years, he has become very concerned about market volatility. He lived through the 2008 crash and realizes that if it happened now, right after retiring, it could be a disaster. Tom is looking to both preserve capital and grow it. He has no pension. So, income is a priority.

A Need For A Plan

Becky, age 57, is a retired elementary school teacher who took time out to raise their two kids.

Even with that time away, she was able to put together a 403(b) account of approximately $151,000 and has a state pension that will pay her about $12,300 per year for life. Her Social Security income is also approximately $12,000 annually.

The couple is building a second home in Prescott, where they may one day choose to move, perhaps selling their primary residence. They are planning an active retirement to include traveling, visiting family, and hobbies.

PROBLEM: Their Living & Lifestyle Costs exceed income from Social Security Checks and Pension

Once upon a time, bonds could fund a retirement. They paid 6% to 8% interest for 30 years. Not anymore.

The Math

Tom is pretty good at spreadsheets. That’s why he is worried. When he plugs in his income from work as well as Becky’s, the total cash flow easily exceeds their expenses of $7,500 a month. But when adjusting the spreadsheet by taking away both salaries, they come up short. Social Security will simply not be enough. He knows they will need between $30,000 to $40,000 annually from their investments right after they retire.

You’d think with more than $900,000 they wouldn’t worry…

But when Tom thinks about the future, he doesn’t just see a spreadsheet. He sees the news and analyzes how the political spectrum is changing. He sees the big spending taking place in Washington and frankly it worries him to see a national debt climb that high. It makes him nervous about three things that he knows could ruin his and Becky’s retirement: 1) inflation 2) taxes 3) the viability of Social Security.

Becky has longevity in her family. Two of her Aunts are still living in their mid 90s. Tom worries about her living on her own after he passes one day. How will she understand complicated investments? She’s not interested now, how interested and capable will she be when she is 85, 90, or 95?

You would think that a $900,000 401k would be all that a couple needs. But if invested wrong, what if a market crash comes along and takes it $450,000 and their income withdrawals are happening as well?

Market crashes (bear markets) can last several years. If they kept withdrawing $36,000 a year on $450,000, their next egg could be cut by two thirds. Meanwhile inflation and higher taxes could also kick in, raising their expenses and their need for greater income.

With the National Debt this high and climbing, Tom worries about “means testing” on Social Security income in the future.

It isn’t that Tom believes Social Security will go completely “bust.” He does worry, however, that a form of “means testing” could take over some time in the 2030s. Right now, he and Becky are in the “Go Go” phase of their retirement. When the economy is open and people can freely travel again, he and Becky are all in. Quality of life matters to them. Tom likes to golf and Becky has many activities that she likes to do.

The place in Prescott means a lot to them. They don’t want to find themselves having to sell the property one day, just to keep living the lifestyle they both love. That’s why rising taxes, a rising cost of living, and concerns about Social Security keep them up at night sometimes.

Tom sometimes wonders if he is retiring too soon. He also knows his employer could hand him the”pink slip” without warning. It’s happened to a few of his buddies at work. As he studies the landscape for fixed income assets that he can trust to carry him and Becky through retirement, he doesn’t like what he sees.

Treasury and municipal bonds are paying interest rates less than 2%. If he rolled over $500,000 into bonds, his money would be safe, but he and Becky would only derive about $10,000 a year in interest. Completely unacceptable. They could leave everything in stocks and take their chances withdrawing 4% or 5% a year. The market has been pretty good to them, but down deep, they both worry the market is too high. Trusting a market somewhere near the top to last for 30 or even 40 years through inevitable recessions and bear markets, doesn’t feel safe enough or secure enough.

They had heard about annuities, but to be honest, they didn’t know that much about them. What they heard wasn’t helpful either. There was some investment person talking them down. They also saw some things about annuities that made some sense. They had heard the income was much higher than a bond with similar safety, and that annuities had been modernized and changed.

The Smart Decision

Tom decided to do some serious checking. He wanted to make sure he approached the topic with an open mind. Tom certainly didn’t want to “walk right by” a really good opportunity to upgrade their financial plan. So he began researching and comparing.

He found IQ Wealth­­® Management, a retirement planning firm who offers their clients Smarter Bucket Planning, Income for Life, and Investments that make sense. They worked with Accredited Investment Fiduciary® Steve Jurich to develop a complete plan that secures their income with room for growth.

Finally, a source of income that was safe, and paid an income of substantially more than bonds. The income came from A rated carriers, many of them more than 100 years old. The income was not only higher than bonds and just as safe, but was guaranteed for life, like a pension.

An income like a pension, without giving up access to principal

After reviewing the benefits of a Next Generation Fixed Index annuity from IQ Wealth , Tom and Becky felt they had found the right mix of safety, security, income and moderate growth. With interest rates on bonds so low, and market volatility so high, the choice was fairly easy for Tom. He decided to roll over a major portion of his 401(k) to an IRA funded by the Next Generation annuity, with the balance going to dividend and technology stocks.

The Solution for Tom and Becky

Safe, permanent income for both spouses, for both lifetimes—far more than any bond can pay at current rates.

Tom and Becky learned that their Next Generation Index annuity in the amount of $500,000 could pay them a lifetime annual JOINT income of nearly $30,000 after several years of deferral allowing the income guarantee to grow. The result is financial peace of mind. Even if the market crashes by 50%, they will not lose principal or income to the market.

Want to Review and Compare Annuities?

How Does a Next Generation Annuity Really Work?

Imagine a secure IRA retirement vehicle that credits you an upfront ten percent bonus to your fixed income account, and then grows your income at a guaranteed rate of seven percent annually until you decide to start taking your income in monthly withdrawals for both your life and your spouse’s life.

Next Generation annuities are here, and they are nothing like the annuities of old. Annuities are part investment, part insurance. They’re designed as a tool for retirement and best suited for people age 45 to 79. They add a pension dimension to your financial plan, while keeping you in control of your money.

There are several different annuity models available depending on your needs and wants. Income can be in the range of five to nine percent for life, depending on age and deferral period. That’s far better and even much safer than almost any bond fund right now. If you started withdrawing five to nine percent annually from a bond mutual fund, you would almost be certain to be out of money in less than ten to fifteen years. Bond funds are terrible investments for growth, income, and preservation in this era of low interest rates. If rates keep rising, you lose money with bonds.

More than ever, annuities are being used for Rollover IRAs from 401ks, 403bs, 457 plans, and TSPs. Imagine getting a ten percent bonus on your income with a seven percent growth rate until you start lifetime safe withdrawals.

I favor annuities that keep my clients in control of their principal—protected from market loss– and that provide high income WITHOUT annuitizing—regardless of whether the market is going up, down, or sideways. By using fewer dollars to get the income you need, you have more dollars left over to invest. It can be a winning combination.

Increasingly, many retiring professionals are including annuities as part of their financial plans for retirement, but many also hesitate because they can’t get their heads around some of the words and terms they hear.

That’s quite understandable, actually. Most of us tend to shy away from things that are outside of our immediate knowledge base, and none of us likes feeling “dumb”.
But for many people, a carefully selected NEXT GENERATION retirement annuity can provide certainty in all the right places: certainty of principal, certainty of income, and certainty of protection for heirs.

We would consider it a privilege to share our knowledge and experience with you. An annuity may not be right for you, but it won’t cost a penny to find out. We offer free reviews to help you compare your options, with no sales pressure or gimmicks.

Right now, you can get a full ten percent bonus on your fixed income account and grow your income at a rate of seven percent annually, guaranteed.

Even if the market crashes by fifty percent, you get the ten percent bonus, your income keeps growing at seven percent, and your principal may grow without losses, uncapped. You go up with the index never down, forward never back.

If terms like “participation rate”, “income rider”, “cap”, and “spread” are throwing you for a loop, don’t worry—let’s meet soon. I’ll explain them all.

How to Create Reliable Lifetime Income

Create 5 to 9 Percent Income

The best type of retirement income is the type that behaves very similarly to a pension. Ideally with lifetime guaranteed income ranging between 5 and 9 percent per year depending on how soon you need it to start. Also, this income source should find a way to compensate for future inflation with reasonable growth.

Lifetime Guarantee Both Spouses

Lifetime guarantees should mean exactly what they say. The right type of retirement income source will have no risk and will be contractually guaranteed to provide income for your life, your spouse’s life, whoever out lives the other. All of this, plus not disinheriting your heirs if that’s important to you.

Avoid Paying Unnecessary Fees

Fees are fees. Life does sometimes come at a cost, but not all retirement income options have annual fees. The ones that do can sometimes drain your income too much to be considered a good option. Instead, seek retirement income that isn’t attached by fees over its lifetime and instead provides you more than enough income.

What Has Changed for Modern Retirees?

The Next Generation

Today’s annuities make old annuities obsolete. When exploring the newer forms of consumer friendly annuities, you will want to leave your pre-conceived notions “at the door.” Today, you can find annuities with no upfront fees, no annual fees, ample liquidity, lifetime income guarantees, and full protection for your heirs. The life insurance company does not keep your money when you die! (when you choose the right kind).

Kiplinger reported in 2013 that it recognized annuities are going into IRAs and 401(k)s more frequently. The tax deferral is not the reason. It is the income security and other benefits motivating the consumer. They noted a statement from Brian Kunkel, national director of advanced planning and solutions for Prudential Annuities, who said that annuities with guaranteed income streams are “increasingly popular (in 401(k)s) with investors who have been burned by stock market volatility.” (Kiplinger, June 2012.)

With 76 million baby boomers retiring at a rate of 10,000 a day, more will be looking for simplicity, safety and income than stretching out for risk in the stock market. The insurance industry has responded with annuity offerings that are more flexible, liquid and consumer-friendly than ever.

Today’s low interest rate environment makes bond ladders unfeasible. The search is on for more effective ways to replace income from employment. More retirees are retiring without a pension and therefore in the market for an annuity to provide a secure lifetime income stream.

There are income riders, death benefit riders and combination riders. Some riders can increase income over time, which can be a benefit in protecting against inflation.

What is an Annuity?

An annuity is an agreement with a licensed, regulated, and audited life insurance company to guard your capital, pay you interest, and pay you income for a lifetime. it is part investment, part insurance. some annuities can accumulate principal and offer a return of capital, like a bond. annuities are not necessarily permanent contracts–you can choose the type of annuity that allows you to stay in for a period of time, and then “cash out”, or take systematic withdrawals for retirement income. most annuities allow for annual penalty-free withdrawals of 10%. other annuities offer an insured income rider that pays for life without the need for annuitizing.

It’s unfortunate that some media resources (with very little actual knowledge of annuities) lump all annuities into one category. In fact, there are four categories of annuities–immediate, variable, fixed, and fixed index.

TIPS:
  • If you want to stay in control of your principal (most people do ), avoid immediate annuities.
  • If you want to avoid fee deductions, avoid variable annuities.
  • If you want to benefit from the upside of market increases, without any market losses when the market falls, explore fixed index annuities
  • If you don’t want the insurance company to “keep your money when you die”, avoid immediate annuities and deferred income annuities (DIA’s);
  • Immediate annuities are the least popular form of annuity, use sparingly.

To fortify your retirement, explore the next generation of flexible, secure retirement annuities. Next generation annuities: principal protection, lifetime income, and uncapped growth potential with no losses.

Q. “Why are more retiring engineers, teachers, health care professionals, managers, lawyers, accountants, and tech workers choosing annuities for their 401k, 403b & IRA rollovers?”

Answer:

  • Preservation of principal
  • Certainty of income
  • More income than bonds
  • A way to “buy a pension”, without “locking up” money
  • Strong diversification (non-correlated to stock market or real estate.)

As more companies move away from pension plans to 401k plans (where you are on our own to derive future income), annuities are being recognized as a way to own an asset that can pay recurring reliable income for a lifetime.)

What is an Annuity? (Part Two)

As stated above, an annuity is a contractual agreement with a licensed insurance company to protect you, the consumer. The annuity agreement spells out your benefits and guarantees. The insurance company is obligated to watch over your money, invest it conservatively, and pay it back to you in one of three ways: a) through steady withdrawals of 5% to 10% per year, b) through an “annuitization” (converting your lump sum to a stream of lifetime payments backed by the reserves of the company), or c) cashing out, just as you would with a bank account or mutual fund.
Annuities are similar to mutual funds or bank CDs in the sense that you are placing funds with a licensed trustee. They differ greatly from mutual funds and CDs by virtue of the fact that an annuity can be used to create guaranteed lifetime income for two spouses, much like a pension from work.

An annuity is not a market-traded asset likes stocks and mutual funds. Annuities are contracts for specific performance, which is a major benefit to retirees.

WHAT ARE THE 4 KINDS OF ANNUITIES?

There are four broad categories of annuities:

  1. Immediate
  2. Variable
  3. Fixed
  4. Fixed Index (also known by nicknames—hybrid, new generation, next gen, and Next Generation)
WHAT SHOULD I KNOW ABOUT COMPARING ANNUITIES BEFORE MAKING MY DECISION?

You should always consider the source of the information you are getting about annuities.

Your stock broker or a financial advisor who focuses on accumulating money on a fee basis may criticize annuities, in some cases because it takes revenue from their plate.

What we have found is this: If they do recommend annuities, it may be based on minimal research because annuities are a sideline for them. Often, a professional who is proficient in managing stocks, bonds, and mutual funds for accumulating money has not spent much time studying annuities. This is reasonable and fine. The advisor may mean well and be eager to serve.

However, the better practice is that person should defer to an advisor with a deep background in annuities  who has done substantial research and comparison—AND will help you compare before settling for the first one.

At IQ Wealth, we are fiduciaries. We are willing to work with you on your annuity choice, even if you keep your investments with another broker or do them yourself.

Brokers will usually only be offering variable annuities. Variable annuities tend to be very expensive.

Sources like Ken Fisher who “hate annuities” and think you should, too—obviously are using the tactic to get visitors to their website, where they can pitch their management services for annual fees that are typically 1% to 2% annually. Over ten years, that will total 10% to 20% and over 20 years that will total 20% to 40% in fees—and you still will never have a simple secure guaranteed lifetime income.

An annuity strategy can be the core and the foundation of a sustainable retirement strategy. It never relies on the stock market going up, and still pays you income when the market goes down.

The right annuity can perform the function that bond funds are no longer equipped to perform.

WHAT ANNUITY IS BEST FOR AN IRA ROLLOVER?

While any of the four kinds of annuities can be used for your IRA rollover, deferred annuities with income riders offer more control to the investor within their financial plan for retirement.

If you prefer to retain access to your principal and preserve your death benefit, the choice comes down to whether or not you want to take principal risk and pay fees–or not.

Variable annuities are “loaded” with fees. For that reason, demand has increased for the “Next Generation” style of fixed index annuities, with optional income riders.

This type of annuity offers a compelling combination of principal preservation, combined with exceptional income and the opportunity to grow capital based on the upward movements of market indexes. Your money is never subjected to stock market losses.

BE CAREFUL WITH VARIABLE ANNUITIES—THERE ARE SIMPLY TOO MANY FEES.

If you had the choice between two mutual funds–one with fees of a half percent and one with fees of three percent, which would you choose? Obviously, the lower fee fund.
Given the choice, most people would prefer NOT to pay 3% a year in fees while risking principal! However, the most (over)sold variable annuities today often have fees exceeding 3% to 4% annually. On a $300,000 variable annuity, it is quite normal to be paying $12,000 a year in fees. Over ten years, that could total over $120,000. With a carefully selected Next Generation fixed index annuity, you could enjoy more income with less risk with annual fee deductions of zero to one percent. Annuities can be a life-saver in retirement, but it is not necessary to over-pay for the best benefits.

When you hear the phrase that “annuities are expensive”, please remember that applies almost exclusively to variable annuities. Annuities have a fee for almost every benefit they offer. Other annuities build in the benefits without nickel and diming you to death.

Right now, variable annuities are not the optimal choice, since the stock market’s risk is currently at an all time high, possibly poised for a fall. next generation fixed index annuities can offer a share of the upside with none of the downside, with income riders that can often pay more income for life than variable annuities. why over-pay for the benefits you want and need?

Documented statistics on fixed index annuities, by such sources as the Wharton School of Business and others, clear show a more optimal choice for the conservative to moderate investor looking to simply their lives, increase their income, and lower their fees.

Remember, only a part of your money goes to the annuity. You still are left with plenty to invest as you see fit. In the IQ Wealth Safer Buckets retirement system, annuities are used for the Income bucket. By using fewer dollars to achieve more income, more of your money is left over to invest for the long term in the Growth bucket.

The correctly chosen annuity with flexible and dynamic income benefits can fill the void currently left by low interest rates on bonds and bank accounts.

If you’re looking to get off the stock market roller coaster, and upgrade your retirement income replacement strategy, we can help you compare and make a wise choice.

WHAT IS AN ANNUITY INCOME RIDER?

An annuity income rider is an insurance guarantee of lifetime income, which can be attached to your fixed index or variable annuity. click on the annuity video below for a few more clarifications on annuity income riders. please call our office for free, no-obligation reviews.

Annuity income riders are a form of income insurance benefit that can be attached to a deferred annuity like a variable or fixed index annuity. it turns a one dimensional annuity into a two or three dimensional retirement vehicle.

With an income rider on a fixed index annuity, your retirement money can remain protected from market losses while benefiting from market gains, and you have insurance that your income will never run out—like a pension.

Annuity income riders address the number one fear of most retired investors: running out of money and running out of income. By guaranteeing income for life ( even if your principal were to decline to zero), the income rider adds a benefit you will never find with a mutual fund or bank account.

Income riders are funded as a pooled benefit from all of the annuity owners in the annuity pool—which can be in excess of thirty billion dollars. Income riders are based on sound actuarial science and are not “gimmicks.” They are mathematically determined insurance benefits.

The cost for riders is typically in the range of one percent annually. Some fixed index annuities offer riders with no annual fee deductions. Riders must be added at the time of purchase—they cannot be added later.

Is it a good deal? Imagine if you walked into Home Depot to buy a battery powered lawn mower for $300. If you could guarantee that it will last a lifetime with full replacement for $3 a year, would you be interested? That’s how an annuity income rider works.

Some annuities also offer enhanced death benefit riders and long term care riders.

Our wealth management firm in Scottsdale can n help you build an effective financial plan for retirement from the ground up–insuring your income, insuring your outcomes and investing the rest with purpose.

Our objective is to make sure you always have the liquidity you need for emergencies and lifestyle. Wealth management begins with wealth preservation and lasting retirement income. Without solid predictable income in retirement, there can never be a truly comfortable retirement.

Our clients enjoy expert education in annuities without sales hype or sales pressure.

We are independent and committed for fiduciary duty. Our system compares leading annuity carriers and hundreds of annuities.

Newer forms of annuities can simultaneously allow for lifetime income without giving up access to your principal. This is accomplished through the use of specialized income riders¹.

Income riders require comparison. There can be as much as a 30% to 40% difference in the amount of income paid from the top paying annuities to the worst paying. We’ll help you compare and make a wise annuity selection.

Dangerous Generalizations About Annuities

There are vast differences between the four classifications of annuities. Some annuities help to grow principal, preserve principal, and pay a very strong income for life—typically two or three times higher than prevailing treasury bond rates. That happens to be what most retired investors are looking for.

Unfortunately, they are dissuaded from annuities by investment brokers competing for investment dollars, or journalists who get their background information from many of those same brokers. Just as you should not get your appendix operated on by even the best dentist in the world, you should always avoid swallowing wholesale any advice on competing products from investment brokers.

As a Scottsdale financial planner focused on complete wealth management for our clients, we are licensed and qualified to offer both investments and annuities, and dedicated to helping clients sort the data and learn essential annuity basics.

The term “wealth management” is refers to addressing all aspects of your financial, estate, and tax planning.  In today’s uncertain financial world, we believe wealth management begins with wealth preservation. The correctly chosen annuity can be a wealth preserving asset to help you make your retirement dollars last. As a Scottsdale financial planner, comparing annuities and finding the best annuities in Scottsdale and throughout the Metro Phoenix area is part of our everyday occupation.

Compare annuities with one of America’s leading authorities on annuities and income planning. Steve Jurich is a best-selling author and Kiplinger contributor. He is the host of the popular radio program MASTERING MONEY, and has helped clients make informed annuity decisions for more than twenty years.

IQ Wealth® Management’s Approach to Annuities

  • Unlike some firms, ours is not a “car lot” with sales people hovering and waiting for sales “leads.”
  • When you are comparing annuity agencies in Scottsdale or retirement planning firms in Arizona, be careful. While some companies show a picture with five or six “advisors”, these can be salespeople who may not be with that firm in six months or a year. Our firm is focused on quality, longevity, and commitment to our clients.
  • At IQ Wealth, we build complete financial plans for life and help you with expert 401k rollover advice to keep your money secure. You will not be passed off to an assistant.
  • We charge our clients no advisor fee, while comparing the results of over 1200 annuities
  • We reject over 98% of all annuities for our clients. Our system reveals the best annuities ranked by income, growth rate, company ratings, and lowest fees. (Several of our selections have no annual fees for their income riders and may offer inflation protection)
  • Learn how you can enjoy secure annuity income equal to 9.77%, with no annuitizing, depending on age and deferral period.
  • KEY ADVANTAGE: You maintain control of your principal without disinheriting your heirs
  • You can retire and STAY retired, without risking all of your money in the stock market or investing in risky bond funds. Relax.
  • Learn why Ken Fisher and Dave Ramsey are completely wrong about annuities (mostly they are biased and under-informed)
  • Scottsdale Financial Planner Steve Jurich (pronounced Jur-itch) is one of America’s leading annuity authorities who helps his clients make informed annuity decisions with transparency and with his clients best interests in mind. Steve understands the industry like few other planners. His clients will tell you the same thing:  Steve takes annuities apart and puts them back together for you so they become crystal clear.

Next Generation Retirement Annuities can be part of a complete financial plan geared for retirement. Work with a Fiduciary and compare, compare, compare!

Want to Review and Compare income options?

“Uncapped” vs. “Capped”

A term you will hear more and more is “uncapped” when applied to fixed index annuities (FIAs). Here’s what you need to know.

  • First and foremost, “uncapped” does not mean unlimited. With any FIA, you always forego some of the upside interest credit in exchange for having no exposure to losses. Most people understand there is never something for nothing.
  • Fixed index annuities (FIAs) are in the class of fixed annuities which offer various methods of crediting interest from period to period based on movements of a market index. This period can be from year to year, every two years or every five years. FIAs are contracts for performance with insurance companies. They are not investments and do not participate in the stock or bond markets directly, but instead are interest-gathering instruments. They are insurance products designed to meet long-term needs for retirement income, and they provide guarantees against the loss of principal and credited interest.
  • FIAs also offer the reassurance of a death benefit for your beneficiaries. In years when the market index is negative, a fixed index annuity reflects a zero interest rate for that period. That would be true no matter which type of crediting strategy is chosen, capped or uncapped. In years where the applicable index has a positive movement upward, the consumer may receive an interest rate that reflects a share of the index movement, reduced in some way by a cap, a margin spread or a participation rate. A combination may also occur.

Note:

Newer versions of fixed index annuities (FIAs) may offer lower volatility indexes that may feature “uncapped” index crediting strategies. The term uncapped does not mean unlimited. Typically a margin will apply, meaning the consumer does not receive the margin amount, but then may receive, as interest, the rest of the increase without a cap. Back casting of indexes is meant only to assist in understanding and gauging how interest might be credited. The consumer has a choice between fixed guaranteed level strategies, and those with the potential for higher levels of interest. As with all financial products and indexes, past performance is neither predictive nor a guarantee of future results.

Key point: No crediting method credits the “most” interest in all market scenarios. That’s why working with an experienced, licensed and qualified advisor willing to take the time to help you compare all strategies is beneficial. Always remember that annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing company. Thank you.

FACT: Most journalists are not aware of, or ignore, the extensive research that has now been done on using annuities properly in retirement.

Information, knowledge and wisdom are three completely different concepts. Who should the consumer turn to for real-world advice?  A reporter in a magazine? They may have information, but do they have an understanding of your particular need for income preservation and principal protection? Should you turn to a Wall Street broker or advisor whose goal is maintaining assets under management and who “hates annuities” with a dogmatic passion?  Let’s just say you may not get a combination of information, knowledge and wisdom from that source.

Perhaps the best solution is to gather information, seek more knowledge and work toward arriving at wisdom. At IQ Wealth, we believe the consumer should delve into actual research performed by credible academic sources. These sources should not be journalists, brokers or the glowing reports on an insurance company’s brochure. Thankfully, there has been a body of growing evidence pointing to annuities in this era of low interest rates, unpredictable markets and longer lifespans.

Substantial research into annuities’ real-world returns, diversification capabilities and income efficiency has now been done by credible academic researchers.

The most prominent is that of Professor David Babbel of the Wharton School of Business. After several years of research exploring 14years of results, here is an excerpt from one of his summaries:

“The consensus of the literature from professional economists is that lifetime income annuities should definitely play a substantial role in the retirement arrangements of most people. How great a role depends on a number of factors, but it is fair to say that, for most people, lifetime income annuities should comprise from 40 to 80 percent of their retirement assets under current pricing. Generally speaking, if a person has no bequest motive, or is averse to high risk, the portion of wealth allocated to annuities should be at the higher end of this range.”

“…Wall Street is a proven resource for accumulating capital over time, provided a person has the time and talent to properly manage risk and opportunity. Wall Street, however, does not provide packaged solutions for secure lifetime income. Only life insurance companies issue regulated annuities. Very few investments can offer steady income without depleting capital over time due to sequence of returns risk. A proper annuity strategy can fit that bill.”

-David Babbel, Wharton School of Business

This doesn’t mean you should run out and buy an annuity and, it is not an endorsement. Opinions about annuities should always be compared against verifiable facts. Your retirement is too important to leave to chance. Your broker or advisor may not favor annuities. Based on what? His or her opinion? It is quite possible they are accumulation specialists with limited knowledge in all four kinds of annuities, as well as the advancements that have taken place over the past several years.

When discussing larger portions of your retirement capital, and especially an item as vital as reliable and sustainable retirement income, there is no room for dogmatic beliefs or un-researched bias.

  • It can be said that investment securities and annuities are at opposite ends of the financial spectrum–however they can work well in tandem. Investments can be speculative and are not suitable for attempting to guarantee a lifetime income. Annuities, on the other hand, are not designed as growth instruments. They are designed to preserve and build income security in retirement that can last for the lifetime of the owner, as well as his or her spouse.
  • It’s wise to be realistic about the stock market and understand that it moves in cycles and even in “fads.” The alert person recognizes that the cycle can end in the midst of income withdrawals. This is a proven recipe for income depletion or “scaling back” and settling for less cash flow. An annuity can be the answer. Comparison with a professional who can offer objective input is not only recommended, it is imperative.
  • As a Certified Income Specialist™ with more than 17 years of advisory experience, I can help you find the right annuity or combination of annuities through a proven process. Never settle for the first annuity you see. Although you may hear terms like “hybrid” and “new generation,” those are generally marketing nicknames, not specific annuities registered with the state.

Annuities can perform a valuable function in a retirement portfolio due to the low interest rates and market volatility that is part of the current long-term trend.  All guarantees rely on the claims-paying ability of the insurer. Knowing what is guaranteed, and what isn’t, is very important. The IQ system reviews and compares the top payouts in America today, sorting through hundreds of annuities and zeroing in the top 10 to 25 in your category. This process can save thousands in fees, and can result in thousands of dollars of extra income annually. Together, we can select the correct annuity for you and make it part of a balanced portfolio.

This overview is very general in nature, is not a prospectus, and is not complete. It is a beginning, not an end. No recommendations are being made herein. Only with a personal review of your risk tolerance and time horizon can a recommendation be made. Our hope is to stimulate you to do further research and to ask better questions. Always review the annuity disclosures and or prospectus carefully. Thank you.

Annuities are not bank deposits and are not FDIC insured. * Annuities are contracts between you and an insurance company. Annuity product guarantees rely on the financial strength and claims-paying ability of the issuing insurer.

This article is meant to provide general information on issues that many people consider in making the decision as to whether or not they should buy annuities; and if they do decide to buy, which types of annuities and which annuity benefits and additional riders will best suit their goals and needs. This information is not designed to be a recommendation to buy any specific financial product or service. Thank you.

¹Note:
Investments and annuities are on opposite ends of the financial spectrum.

Therefore, we maintain two divisions: securities and insurance. Fee-based investment advisory services are provided by IQ Wealth Advisory, LLC, a Registered Investment Adviser. Insurance and annuities are provided by IQ Wealth Management–Insurance Division.

Annuities are insurance-based financial vehicles designed not for growth but for income preservation and sustainability. Annuities are not FDIC insured and may have surrender charges for a period of time. Generally, a partial withdrawal of 5 to 10 percent is allowed annually, penalty free. The annuities we recommend waive all surrender charges upon death. All guarantees rely on the financial strength and claims paying ability of the issuing insurer. At IQ Wealth, our policy is to require at least 100 years of successful track records and strong ratings for any insurance company we recommend.

Income riders are a means to enhance the income benefits provided by the underlying annuity contract. A discussion regarding whether an annuity would meet your needs and objectives should take place before deciding if an income rider is appropriate.

External link policy:

External links, which direct our website visitors to sites outside the Arizona Department of Insurance’s review, are provided throughout our website for your convenience.

The appearance of a hyperlink on our website does not constitute endorsement by IQ Wealth Management, IQ Wealth Advisory or Steve Jurich. These links are provided for convenience only. We do not exercise any editorial control over the information you may find through external links, and bear no responsibility for the accuracy or content of web pages accessed through external links. Any concerns or comments related to the contents of the sites accessed through external links should be directed to the author of that website. Use of any information obtained from such external links is voluntary, and reliance on it should only be undertaken after an independent review of its accuracy, completeness, efficacy and timeliness.

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Freedom in Retirement

Through the financial counseling process, we help our clients implement strategies matched to risk tolerance, income needs and family priorities. We help our clients focus on where they are now, where they want to be and what steps must be taken to get there.

We offer a free retirement review for retiring professionals with portfolios of $500k to $5M+.

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