Baby boomers are streaming into retirement at a rate of 10,000 per day. Statistically, they are living longer than their parents and grandparents, and a large number of them are heading into their longevity-enhanced golden years with no pension and no real plan regarding a sustainable retirement income. —
When Social Security was first enacted in 1935, retirees could count on receiving their social security payment beginning at the age of 65. At the time, the life expectancy at birth was 58 years for men and 62 for women, so Social Security was something many retirees never had a chance to collect. For generations, employer-funded pensions often filled in the income gap for older Americans after they stopped working, but company-sponsored pensions are dwindling. Instead, some employers offer 401(k)s, which may not be equipped to provide a reliable lifetime income source.
The challenge many financial planners today are faced with is helping clients with no pension achieve similar lifelong predictability in their retirement income strategies through the use of insurance products. Certain insurance products, like fixed indexed annuities, can help provide a sustainable and reliable income stream for the lifetime of the annuity purchaser, as well as their spouse’s lifetime, to help protect their retirement income from market volatility. Market investments, on the other hand, can be less expensive and, assuming the portfolio is properly constructed and based on typical market returns, may be able to provide lifetime income through a “total return” strategy. However, this strategy has no guarantees and, considering the current interest rate environment, the recommended withdrawal rate would be very low (2-3 percent), reducing the possibility of a person’s money lasting for the rest of their life.
In his recently released book, “The S.M.A.R.T. Approach, a 5 Step Process to Life, Leadership and Investing,” Financial Planner Vincent Virga, President of PFS Wealth Management Group in Bayonne, NJ, says pre-retirees in a time when employer-sponsored pension plans are diminishing, do have options for building their very own predictable, lifelong retirement income strategy, one that they can retain control over and even pass on to a spouse and beneficiaries after death.
Virga says that this strategy, built with insurance products like fixed indexed annuities, may even be more flexible and long lasting than an employer-funded pension.
“If structured properly, this strategy can help individuals create retirement income they cannot outlive through the use of insurance products,” he says. Insurers issue lifetime income guarantees based on their own financial strength and claims-paying ability.
“And if you predecease your spouse, you can feel confident that, if structured properly, the lifetime income will continue for the rest of the spouse’s life as well, so there are fewer worries about bills getting paid every single month.”
Virga says that it is all too common for people to find themselves in a situation where they “run out of rope” during retirement. With traditional pensions, once you have chosen your payment method, “you may be unable to make changes to your pension,” he says. That means if a life-changing event occurs that requires immediate funding or access, you may be unable to receive the remaining lump sum.
In addition, pensioners who take a payment option instead of a lump sum option who pass away at the same time as their spouse may not have the benefit of providing for the remainder of their pension to be passed on to beneficiaries. Instead, the pension may simply terminate with no contribution to one’s legacy.
By creating their own lifetime retirement income strategy, retirees and pre-retirees can take control of their financial future.
Advisors or brokers who recommend that a person’s sustainable retirement income comes from market correlated investments should be asked to provide their clients with a detailed explanation that helps them understand the “sequence of returns” on that income if there is a market downturn during the income distribution phase. Investors need to know exactly how a downturn in the stock market could impact their need for a reliable and sustainable income that is being derived from the stock market.
Most people understand investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss during periods of market declines. Fixed indexed annuities, as a part of a retirement income strategy, can help form the foundation that can provide a continuous income stream over which the individual maintains control.
Securities and Advisory Services offered through Madison Avenue Securities, LLC. (“MAS”), Member FINRA & SIPC and a Registered Investment Advisor. MAS and PFS Wealth Management Group(“PFS”) are not affiliated companies. The National Ethics Bureau (NEB) is a paid for membership organization. Vincent Virga is licensed for securities in FL, MA, NJ, SC and advisory licensed in FL, MA, NJ, SC, and NY. Please inquire about your state prior to further discussions.
Source URL: http://councilofeliteadvisors.com/liftmedia
Release ID: 108112