Lesson #1
Your New Annuity Strategy
7 Annuity Strategies of The Wealthy
Would You Like To Preserve Your Principle, and Predict Your Income Through Stable Growth in Retirement?
Read On!
The Fixed Annuity
An annuity is similar to a certificate of deposit in that an annuity is a contract between you and an insurance company whereas a CD is a contract between you and a bank. A “fixed” annuity is so-named because it guarantees a published interest rate with no investment risk. A “variable” annuity, in contrast, typically invests in non-guaranteed investments.
The two main types of fixed annuities are immediate and deferred.
Immediate Annuities
When you purchase an immediate fixed annuity from an insurance company, your principal becomes a stream of monthly income through a defined series of payments. You establish the length of time or elect a guaranteed-for-life payout, depending on your chosen options.
The insurance company insures an immediate fixed annuity so your income payout is guaranteed, which is a strong benefit, but the drawback is that you usually receive a low growth rate on your principal with this type of annuity. And while you may receive guaranteed monthly payments for your specified period of time (or over your lifetime), the payments are not typically adjusted for inflation.
Insurance companies base immediate annuities on guaranteed calculations, so your decision to begin an immediate fixed annuity is irreversible, once started. You are locked in and cannot recover the principal at the other end, and neither can your beneficiaries.
Deferred Annuities
A deferred fixed annuity functions more like a certificate of deposit. When you purchase a deferred fixed annuity, you are guaranteed a stated rate of return on your money for a specified number of years. In this case, your principal is guaranteed and insured by the insurance company, and at the end of your contract term, you can withdraw 100% of your account value without penalty.
Your money grows tax deferred with a deferred fixed annuity, and there are no annual fees. You are allowed to withdraw up to 10% of your account's value every year without penalty which can, in some cases, make annuities even more flexible than bonds or certificates of deposit that do not allow you to access your principal. While you are allowed to withdraw 10% per year, you are still limited in respect to liquidity and flexibility.
Advanced Annuity Strategy and Structure
As with any investment, there are mixed reviews around fixed annuities. Some people have positive experiences and some report negative experiences. Poor experiences most often result from an investment that was out of alignment with the person's investment needs or objectives when it was sold or structured.
Realistically, fixed annuities are similar to most things in life with both pros and cons. Most people appreciate the pros: tax-deferred growth, safety of principal, guaranteed growth, and guaranteed income. They are not thrilled about poor liquidity, irreversible decisions, and little or no real inflation protection, however.
While annuities certainly provide definite benefits for some, there are issues that create problems for others. This demonstrates the limitations of annuities as stand-alone products.
What if, instead of purchasing a single fixed annuity by itself, you could use a more advanced strategy to structure these same fixed annuities? By restructuring, you can substantially magnify fixed annuity benefits while reducing (or even eliminating) the negative features.
It's all about the strategy. Individual chess pieces have no real impact sitting on a board, but when in the . hands of a world champion chess player wielding an advanced strategy, you witness real results. The use of a laddered annuity strategy with fixed annuities is similar.
How Does a "Laddered" Fixed Annuity Strategy Work?
The concept is surprisingly simple!
Instead of using your asset to purchase one big annuity, we divide your nest egg among smaller, more manageable "legs" which are fixed annuities, each with a specific purpose. Some "legs" are designed to pay you income, while others are for replenishing your original balance. We structure these "legs" in the proper sequence and deposit the correct mathematical amount into each leg.
This laddered strategy provides an indefinite stream of retirement income that keeps pace with inflation without depleting your original principal. The last “leg” in line is always designed to re-grow your original principal, and since we are only using guaranteed interest rates, your money will be there when you need it! This self-funding mechanism is specifically designed so keep you from running out of money in retirement.
With this "ladder" strategy, you are never stuck with an irreversible decision because we only use short term deferred fixed annuities. Your nest egg isn't stuck with a low payout rate, and at the end of each term, you have options! You can walk away with your principal without penalty or you can continue with the program and maintain a steady monthly income.
Now you have a strategy for a steadily rising retirement income stream without depletion or forfeit of your principal! This is how we can use fixed annuities to amplify the benefits while reducing or eliminating the the bad features as opposed to purchasing a single investment product.
Is A Laddered Fixed Annuity Portfolio Right For You?
The only way to know if a laddered fixed annuity portfolio is right for you is to talk with a licensed advisor specifically trained in this type of advanced annuity strategy.
Schedule a call with a licensed advisor to discuss a laddered fixed annuity strategy if:
1. If you would like to have your portfolio redesigned to help avoid downside volatility; provide predictable retirement income; and preserve principal all at once.
2. If you would like to generate a retirement income stream that keeps growing over the years, regardless of the stock market's cooperation.
3. If you would like a retirement income plan that will not fluctuate with the market.
Educate yourself about generating a lifetime of safe, flexible retirement income and give yourself an opportunity to see a visual example of results without cost or obligation by scheduling a call now.
