Retirement Wealth Advisors
NOVEMBER/DECEMBER 2016
| TAMPA BAY MAGAZINE 63
the previous 10-year bond. The only
difference is that now he would be
facing this predicament much earlier
than in the scenario where the bond
reached full maturity. Most bonds offer
call protection for the first two to three
years of the bond period, but far fewer
offer call protection for the life of the
bond.
Don’t put all your wealth in
one basket!
Achieving asset protection today
may require more than the
traditional asset allocation
strategies. As you prepare for retirement,
your financial professional is likely
to look for products that provide a
source of interest, diversification, asset
protection and guaranteed income.* If
you currently own bonds, you may want
to consider adding annuities to your
overall retirement income strategy to
help protect and grow your retirement
assets while providing a steady, reliable
source of guaranteed income throughout
retirement. An annuity is a contract you
purchase from an insurance company.
For the premium you pay, the insurance
company provides you income, either
starting immediately or at some time in
the future. Annuities offer tax-deferred
accumulation potential, a death benefit
during the accumulation phase and,
when you’re ready, a guaranteed stream
of income payouts, which are backed
by the financial strength and claimspaying
ability of the issuing insurance
carrier. Like bonds, annuities offer a
safer alternative to investing in the stock
market, where volatility can put assets
at risk. One of the features an annuity
has that a bond does not is a guaranteed
income stream for life.*
Annuity benefits include:
» Guaranteed stream of income for
the remainder of your life
» Protection from market down turns
» Tax-deferred asset accumulation
» And death benefit options during
the accumulation phase
That means regardless of what
interest rates do, you continue to
receive the same, steady income
each year for as long as you live.
So, let’s look back at our previous
example with Bob and his wife.
Investing his $500,000 in bonds, Bob
experienced the downside to interest
rate risk. What if he had instead used
that $500,000 to purchase a fixed
annuity with an optional “income” rider?
Many “income” riders available today
can offer Bob a 4 percent to 5 percent
lifetime withdrawal rate, depending on
his age. In other words, if he purchased
his annuity with $500,000, he could
generate $20,000 to $25,000 in annual
income guaranteed for his lifetime.
Know that optional income riders are
subject to availability and may require
an additional fee, (AS I SAY ON MY
RADIO SHOWS: BENEFITS ARE
NEVER FREE!) but as you can see, they
could potentially provide a welcome
income solution. One of the tradeoffs
is that, unlike bonds, when you receive
income from your annuity you will see
your principal erode over time. With
an annuity, the income is guaranteed,
but the principal will be reduced by
any income payments. So, looking back
at Bob’s situation, had he purchased an
annuity rather than a bond, he could
still generate the additional income he
needed, free from the unpredictability
of the stock market. While his principal
may not have remained fully intact,
his income stream would have, for the
remainder of his life, and possibly the
life of his wife as well. Most annuities
also have provisions that allow you to
withdraw a percentage of the value of
the contract each year up to a certain
limit, without penalty. However,
withdrawals will reduce the contract
value and the value of any protected
benefits. Excess withdrawals above
the contract’s limit typically incur
surrender charges (early withdrawal
penalties) within the first 5 to 10 years
of the contract. Because annuities
are designed as long-term retirement
vehicles, annuity withdrawals are also
subject to ordinary income taxes and, if
taken before age 59 ½, are subject to a
10 percent federal additional tax.
It’s good to have options
With the potential for a rising
interest rate environment,
the return on your fixed
income investments may not be what
you had hoped — possibly changing
your perception of your future standard
of living. And with retirement getting
closer and closer, you may not have
time to make up any losses to the
income you were counting on using
to do all that you had planned. Now
may be a good time to consider an
annuity as a supplement of your over
all retirement strategy. Reviewing all
of the components of your retirement
strategy before the paychecks stop can
help you feel more confident as you look
forward to retirement.
* This material has been prepared for
informational and educational purposes only.
It is not intended to provide, and should not be
relied upon for, accounting, legal or tax advice.
Please consult with a professional specializing
in these areas regarding the applicability of this
information to your situation.
Investment Advisory Services offered through
Mutual Trust Asset Management
Your Financial Architects
www.THEHOLLANDGRP.COM
727.724.3334
2637 McCormick Drive #101
Clearwater, FL 33759
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