Why the Right Kind of Annuity Can Boost Your Retirement Income

The risks of longevity convinced this early retiree that guaranteed income has a place in his portfolio.

The ultimate in retirement security is guaranteed, lifetime, inflation-adjusted income. Most of us will get some of that—though not enough— in the form of Social Security. A few will get the balance of what they need from pensions. But the rest of us will see a shortfall between our fixed living expenses and our guaranteed income.

You can try to fill that gap by making systematic withdrawals from your investment portfolio throughout your retirement. A balanced portfolio is likely to outperform many other retirement income options, if the markets do average or well. But it’s not guaranteed. Even for experienced investors, there are serious risks in managing a retirement portfolio.

The insurance industry offers what sounds like a safer idea: an annuity. Annuities can provide peace of mind by removing longevity risk—the chance you’ll outlive your assets. And, they let you generate more safe income than you could from the same amount in a portfolio of stocks and bonds. That’s because, with an annuity, you’re consuming both principal and earnings, plus you’re pooling your lifetime risk with other buyers.

Unfortunately, many kinds of annuities, especially complex variable and indexed annuities are a quagmire of pushy salespeople, hidden expenses, and dizzying complexity. Consequently, many careful retirees rule out any kind of annuity as a retirement income solution. I was once in that camp. Why would I need an annuity, when I had proven success growing my own diversified portfolio in excess of our retirement pension plan income needs?

But then the market crashed in 2009. Our portfolio did better than most, and we had no need for income at the time, but the huge drop demonstrated the potential downside of retiring at the wrong time. I knew that retirees who had purchased annuities were happy with the steady paychecks they received during the crisis. I realized that annuities had a place in retirement planning, at least for those without the investing skills and fortitude to endure a severe recession.

Once I retired, the decades ahead without a regular paycheck suddenly became very real. It didn’t matter that I had many years of investing under my belt, and was confident in my ability to manage our portfolio. It didn’t matter that we lived frugally, and could cut our living expenses even further if needed. Because there was one thing I realized I couldn’t control: how long I would live. Insurers, however, could control that variable and protect me from running out of money, by combining my lifetime with thousands of others via an annuity.

Finally, when I reviewed my estate plan, I realized that, even though I had accumulated enough money to provide for my family, I would not necessarily be around to manage those assets for the duration. I could see that my loved ones might need to put a portion of our assets on “autopilot,” so they could count on a steady lifetime income without worries.

Then along came research demonstrating that combining single-premium immediate annuities (SPIAs) with stocks may be the best way to generate retirement income for a wide set of circumstances.

Given all those factors, I’ve come to believe that you should plan for a guaranteed income “floor” in retirement. This assures a reliable income stream that meets your essential living expenses until the end of your life, however long that may be.

Annuities will be a key part of that equation for many. We’re talking here about simple single-premium immediate annuities, not their complex and expensive cousins—variable and indexed annuities. With a SPIA, you hand the insurance company a lump sum and they immediately begin paying you a monthly amount. There’s no unexpected variability, no complex indexing formulas, and no extra fees.

When should you buy an annuity, and how much annuity should you buy? These are complex questions that require personal financial planning. For example, we are in our mid-50, our lifestyle is flexible, we can manage our own investments, and we don’t need extra income right now. So it’s too early for us to put our retirement finances on “autopilot.” We will probably wait until our mid-60, when we may put about half our current portfolio into annuities.

[Source: http://time.com/money/3955901/retirement-income-right-annuity/]

Are You Prepared to Pay Your Taxes in Retirement?

You’ve spent your life, or a good portion of it, preparing for retirement. You’ve educated yourself about Medicare in all its many types, Social Security, and all of your savings plans. But have you thought about taxes?

Retirement will certainly bring about surprises. You’ll spend more in one area than you predicted, and less in another. But Uncle Sam and the state that you call home can bring about the biggest retirement surprises of all.

Here are some important tax topics to remember when you’re working to secure your retirement income:

Tax-Deferred IRAs Don’t Necessarily Mean Tax-Free

If you have a Roth IRA, your contributions have been made after taxes. So when you’re ready to start taking withdrawals for retirement income, you won’t have taxes due. Roth contributions are limited, though, so it’s not likely to be your primary retirement income.

Traditional IRAs are taxed when you withdraw. So not only will you need to plan to pay taxes, you’ll also have to budget carefully to have the right amount of usable income after your taxes are paid. You can wait to take withdrawals, but not for long.Bank rate says you’ll have to begin taking out what you’ve put in once you turn 70 1/2.

Social Security is Taxable

Another surprise for some people is that Social Security benefits are taxable. But for many, this won’t be an issue. If your benefits total $32,000 or less, you’re probably safe from duty. More than that, and you’ll owe Uncle Sam and perhaps the state.

Although you probably can’t avoid paying taxes if you receive more than $32,000, you can make tax time a bit more manageable. Social Security can withhold taxes, the same way taxes were withheld from your work income, according to AARP.

Taxes on Investments Can Vary Greatly

There’s no single tax rate for investments — they can vary a lot. For example, Bank rate says some qualified dividends and capital gains are taxed at a lower rate than income. But if you’ve invested in bonds, the interest will be taxed the same as income. One important difference is municipal bonds, which are usually exempt from taxes.

You’ll need to micro-manage taxable investments, recommends Bank rate. Striking a good balance is critical for helping you dodge a major tax hit. This is also true for investments that don’t generate income.

Life Insurance is Taxable at Different Rates

Life insurance protects loved ones after your death, so tax questions about it might not occur to you at all. If you leave your life insurance untouched for beneficiaries, it should be tax-free for them. But you might not know that you often can dip into your life insurance, up to the amount that you paid in, and receive tax-free retirement pension plan income during your lifetime.

Annuities are another type of life insurance, but they have different tax implications from traditional policies. With an annuity, you have designated retirement income that you can receive as a lump sum or a steady stream until your death. Some even provide a life stream plus pay the balance to a beneficiary. Unlike traditional life insurance, annuities come with a tax burden on part, but not all, of the income, according to Bank rate.

Where You Live Makes a Difference

Think warm weather and sunny skies are what draws retirees to the Sunshine State? Not entirely. Florida doesn’t have state income tax, and it’s not the only one. If you live in or relocate to a state without income tax, your burden will be reduced dramatically.

A financial advisor is one of the best investments of both time and money that you can make for your future. There is so much to learn, and information changes constantly. New Retirement can connect you with the right advisor who can clear away the haze and help you chart a course for a retirement where surprises are the exception and not the rule.

[Source: http://www.newretirement.com/blog/2014/12/19/are-you-prepared-to-pay-your-taxes-in-retirement/]

5 Ways to Save for Retirement on a Limited Income

Planning for retirement isn’t a luxury that only the wealthy can afford. In fact, the less we earn the more important our retirement savings becomes to our futures. While we need our income now for day-to-day essentials, we’ll need it more once we retire and have fewer opportunities to earn.

Social Security will help some, and so might other benefits such as a pension, if you have access to them. But the most reliable way for anyone to secure their own future is by planning for it now. And we can all do that, even if income is modest.

1. Max Out Every Available Tax Break

Every dime that you contribute to a traditional 401 (k) plan or an IRA is tax deferred. This means that you won’t pay taxes on the amount you contribute until you’re ready to begin withdrawing at retirement.

When you make contributions and defer taxes on those dollars, you’re reducing your overall taxable income. Better yet, you can make last-minute contributions right before tax time in April, according to Huffington Post, and still claim tax savings.

2. Make Saving for Retirement an Automatic Thing

It seems like the less money you have the more acutely aware you are of every dollar that’s earned and spent. When contributions are something you think about every month, there are at least 12 chances per year to make a poor choice. More, when you factor in weekly or bi-weekly paychecks.

Automatic deductions take the decision making process out of the equation. It might pinch a little at first. But chances are, you’ll settle into it. In time, you might rarely think about those deductions at all. Except, of course, when you realize just how much you’ve saved.

3. Resist the Tax Refund Temptation

Tax refund time is an opportunity to save or spend. For many people, a nice refund offers the means to buy things, such as a new TV or computer, that aren’t in the usual budget. And before too long, the whole refund is gone. Saving instead of spending is a better choice.

If you can’t save your whole tax refund, consider saving half. U.S. News Money says the IRS form 8888 not only lets you take a direct deposit option to your checking or savings account, but also lets you send your refund directly into an IRA. You can even send part to checking and part to an IRA.

4. Set a Goal

It is a proven that setting a goal provides motivation.  This is true of saving for retirement as well.  No matter how old or young you are, it can be a great idea to use a retirement calculator to find out how much savings you will need to live the life you want in retirement.

Knowing what you need and setting a goal is perhaps the best way to save for retirement. Get saving and saving the right amount.

5. Increase Your Savings Rate Every Year

Another best way to save for retirement is to increase how much you save every year.

Just as saving automatically takes some of the emotion out of making deposits into a retirement plans account, so can increasing the amount that you save by a small percentage every year. Some 401 (k) plans offer an automatic savings rate increase. If yours doesn’t, U.S. News Money explains that you can still make that choice on your own.

An automatic increase might sound difficult when you’re already saving every penny that you can afford. But there are so many ways to cut back to make it possible. Changing cell phone, cable, or Internet plans could offset the difference so that you don’t feel it at all.

 The most reliable source for retirement income is you. No one else has your best interest as much at heart, and no one is in a better position to offer the security that you need. The sooner you start, the better off you’ll be.

New Retirement has tools that help with saving, investing, and planning for retirement. Whether it’s decades away or closer than you’d like to admit, one day you’ll no longer be in the workforce. Try our Retirement Calculator and learn what you need to prepare for it.

[Source: http://www.newretirement.com/blog/2015/05/28/5-ways-to-save-for-retirement-on-a-limited-income/?nabe=6690247808122880%3A0]

How to Identify the Best Pension Plan in India

This article is specifically addressed to young employees and will not discuss about the immediate annuity plans which are purchased at the beginning of their retired lives. Pension plans get policyholders a regular income during their post-retirement lives. Take expert’s advice for retirement planning, saving and investing. Do not sacrifice retirement planning for child plans and avoid wrong investments also. Below are some of the factors to identify the best pension plan in India:

• No Guarantee

Majority of customers focus on best retirement plans instead of concentrating on its suitability. Avoid this habit because it is beneficial in the long run. Insurance experts suggest buyers to loot for the entire gamut of investment plans instead of looking for best policies. It helps policyholders to create a huge financial corpus for post-retirement life.

• Charges and Transparency

Customers also need to be aware of the structure charges and how their money is being invested in the pension plan they have purchased. Online comparison of different retirement plans offered by various insurance companies in India gives a far better picture of how they are using investors’ money.

• Prefer Better Options

Instead of investing your hard earned money in a plan where risk level is high, explore some plans which offer guaranteed income and involve low risk level. The idea is to invest in a pension plan which can support to build a larger retirement corpus and not just blindly invest in a policy that tagged as ‘best’.

• Liquidity

In case person has assigned the role of retirement corpus to an investment, then liquidity should be the last concern for that investment. While investing money in a pension plan, remember that you’re investing for retirement and not for short term goals.

Compare transparency, safety, costs and returns of desired policies to select the best retirement plans in India online.  Without proper financial planning, person will end up retiring without sufficient savings at hand. Generally, people have a tendency to invest in a plan that includes high risk and huge returns to avail good benefits.

Delay in buying an online pension plan costs person badly. Know your exact requirement by getting idea about how much amount is going to be adequate. Once customers know their needs, it will be easier for them to select the plan that suits their budget and requirements. Set a retirement savings goal with sufficient time span in hand and implement the plan accordingly to realize dreams.

Those who know the importance of pension plans will surely buy one when they start earning. Policyholders invest the amount over the span of the employee’s career and then the eventual balance in the account is paid on retirement.

These policies offer asset growth and financially protect better today than in the past. Manage your income professionally in a stable manner, so that pension plan can make a good difference in the long run. Use retirement plans to fund your golden years because these insurance products have strength to save, invest and manage investor’s money at any life stage.

[Source: http://blog.policyboss.com/pension-plans/identify-best-pension-plan-india/]

Overview of Pension Plans in India

The word ‘pension plans’ would create a sort of consciousness to all 30 plus year old employees sooner or later in their lives. In fact, it is one of the serious concerns to governments especially when it works in the direction of offering a financially protected life to its senior citizens.

Pension plan in India can be broadly categorized into plans under private sectors and government sector. Plans bought by individuals from insurance companies in India are gaining importance with an enhancement in quality of standard of living and rates.

Today, there are various insurance service providers that offer retirement and pension plans with good returns, competitive benefits and services. These plans are completely different from term insurance policies, which are purchased to cover risk in case of a sudden death of a breadwinner.

• Terms involved in Pension plans

Participatory Policy

The plan which offers separate specified returns as a part of the profits gained on investment using premiums paid to the insurer.

Vesting Date

It is a date when the policyholder begins getting income in the pension form from his insurance provider.

Death Benefit

The money which is earned as a benefit on the policyholder’s demise is called as death benefit.

Surrender Benefit

It is the sum earned when the insured withdraws the plan during the premium payment period. There is a specific certain period after which the plan can be surrendered.

Generally, old age pension plans offered by retirement insurance company in India are preferred by self-employed and people who already have other backup for the retired life. In India, majority of people are benefited through tax benefits which are possible because of these policies.

These insurance products are designed to give a rough idea of how the future expenses can be managed. Policyholders can avail a wide range of pension plan benefits and enjoy their financially protected lives.

Insured person can get tax benefit under section 80C of Income Tax Act and the deduction of taxable amount is a benefit to the policyholder. These plans provide individuals a regular income in their golden years by helping individuals build a retirement corpus.

[Source: http://blog.policyboss.com/pension-plans/overview-pension-plans-india/]

Tips for Retirement Planning

Effective retirement planning helps you to experience a secure retirement. Here are some tips for those people who really want to enjoy their post-retirement lives:

Opt for the best retirement plans

Buying online pension plans is the most convenient way to invest your hard-earned money for better post-retirement life. Once you start investing in this policy, policyholder will get enough money to continue his or her lifestyle even after retirement.

Buy pension plan when you start earning

If you buy a retirement plan early, then it helps you to build a strong financial corpus. In fact, this corpus makes you ready to face any kind of emergency situations without worrying money issues.

Review and update policy

Review your retirement plan regularly to ensure it will fulfill your needs in the future. Do not forget to monitor your progress towards your retirement goal. Consider your current situation, risk appetite, market condition and future circumstances. Remember that all these points impact your pension plan online.

Thoroughly follow your plan

Pay complete attention while reading terms and condition of a retirement plan else person could miss important gains. Don’t keep changing your goals to often because it may harm your planning.

 Think about overall effect

In case you feel that buying pension plan online is not worth, then consider its overall effect on your future especially after post-retirement life. This plan is designed to make you financially independent by giving you a regular source of income once you stop working.

After maturity, it will not only pay for your regular expenses but will also pay your medical expenses. Pension plans offer you financial support when you need it the most.

[Source: http://blog.policyboss.com/pension-plans/tips-retirement-planning/]

Retirement Income fund - securing future

Retirement income fund means any kind of investment product which is available to every kind of people as a stable means of saving for the near retirement. It is popularly known as RIF and is mainly investments in the form of mutual funds. The different types of mutual funds include large or mid-cap stocks and bonds. The portfolio balancing of RIF is done by allowing monetary gains moderately through orthodox approach, this is done so that the bond retains its values in its process of providing a source of income to the people who have invested in the various RIF.

Understanding RIF

RIFs are very important as they provide stable average growth of different assets of the people which they keep aside for retirement purposes and for this reason these funds are vigorously maintained. One thing people should keep in mind about RIF is that they are not treated specially by the tax department but are treated as normal mutual funds and thus are open to all kind of market risks. Although they are a traditional investment they do not guarantee secured income after retirement. Other than mutual funds there are few other types which pay at regular intervals either on monthly basis or six monthly basis and they require minimum investments.

Types of retirement income funds

There are mainly three types of income funds for retirement plan. These are as follows:

• Target date funds: this type of income fund is designed in two ways. 1. They are designed to help people who have invested for retirement funds to get through retirement ages. 2. Another way in which they are designed is such that by investing in a number of mutual funds people retire to profit from these investments. This type of investment yields low income but it gives people appreciation as this type of investment provides good exposure among the beneficial classes.
• Income replacement funds: are also known as reverse target date funds. In this type of income fund the investment company slowly returns the investor’s invested money plus any kind of capital gain before the company investment policy terminates in any particular year. This kind of income funds has both its pros and cons as people can either gain highly from this investment as the income yield is high or can go through major losses as the loss in this type of investment is steep.
• Managed payout funds: this type of income fund investment is a safe bet as it provides monthly income and there is also a scope for growth in investment. Like all over mutual funds, managed payout funds too are subjected to market risk but one advantage of this is during market lows this kind of investment can either cut its payout amount or can return the investor’s capital. An idea can be formed on how much income this type of fund will yield by looking into its yearly yields.

Overview

As retirement income funds are managed by professionals, one does not have to worry about the income distribution strategy, balancing of the income when the market changes or about the allocation of one’s assets. RIFs not only pays a stable amount of return but also keeps up with the rising or falling inflation. The best thing about investing for the future is that people can get lifelong monthly income without giving up hold on their assets.

[Source: http://whenwilliretire.com/retirement-income-fund-securing-future/]

Retirement Income Funds

Do you want to save money and want to use after retirement? Do you need some help to choose the best retirement income fund for you? Then, you have come to the right place. Here we have summarized on retirement savings together with retirement income funds. Have a glimpse at these details as they give you complete information on these retirement income funds and help you find the right path for you.

Most of them are thinking about their future after retirement for this reason only, they are going for these retirement income funds option. If you are also the one who wants to lead a cool life after retirement, then these retirement income funds are for sure going to help you a lot. There are many people still who think there is no need for them to use these retirement income funds but in reality, they assure a peaceful life after your retirement.

You need not have to ask anyone to support you after retirement as these retirement income funds help you to manage your expenses in your old age. It will act as a great investment, which you have done in your life as you can live with confidence with no trouble after retirement. No other investment might help you like these funds support you in your old age when you are in need for money. You will get a chance to pay all your bills without asking anyone.

Research on retirement income funds

All that you need to do for this is to do some pre research on these funds and different plans there before taking any final decision. This way of approach helps you to grab the best retirement plan for you. There are ample resources online where you can gather information on these funds and get help to pick the best one that match with your requirements. These funds will become the best investment for you in your life, which benefits you can enjoy after your retirement. The main aim of these funds is to encourage you to live without any tension.

Know your needs

If you would like to benefit more from these funds, then it is highly essential for you to be aware of what you are expecting from these funds as it helps you to pick the best one for you. Try to sort out all your requirements as it supports you to grab the ideal one for you. If you are unable to find the right option for you, then you can go through tips provided by various advisers there online.

This is one more way, which you can apply to gain more benefits. There are different factors, which you have to consider while going for these funds. Know about these factors because it will support you to pick the ideal option for you.

Most of them go for these funds without having knowledge on these funds but it is very important for you to understand about retirement income funds before only. Because, it helps you to benefit from these funds after you retire.

[Source:  http://whenwilliretire.com/retirement-income-funds/]