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This Annuity Report contains information that Wall Street, Uncle Sam, Banks, and Insurance Companies don’t want you to know.

Caution: The information contained in this report could save you money!

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Safe MoneyThis Book Will Keep Your Money SafeFrom Losses, Fees, and Inflation

Presented By Robert C. Eldridge

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Table of Contents

What Are Annuities? …….……............................................1

The History of Annuities………………………….………………...7

Benefits of Annuities…………………………………………………..9

Immediate Annuities…………………………………………..……..12

Deferred Annuities…………………………………………………....15

Fixed Annuities…………………………………………………….…….17

Indexed Annuities..……………………….……….……………..…...22

Mutual Funds vs. Annuities……………………………………...26

CD’s vs. Annuities…………………………………………………..….32

Annuity Myths…………………………………………..……………….36

Annuity Secrets…………………………………………………….……42

Advanced Annuity Planning…………………………………….48

Avoiding Probate………………………………………………………54

Retirement Planning…………………………………..……………61

Annuity Analysis……………………………………………..………..71

Annuities are contracts or policies issued by insurance companies that allow you to plan for retirement by allowing you to accumulate funds on a tax-deferred basis. When you decide to take a payment you have multiple options. You can choose an income you cannot out live, or take an income for a period certain such as five, seven, ten, fifteen, or twenty years. Most people choose a monthly income option however; you can choose an annual payment.

How do Annuities Work?

Annuities such as fixed, fixed indexed and variable annuities are insurance vehicles for accumulating retirement money. These vehicles allow for growth on a tax-deferred basis and you will not get taxed on money you are not using. A certificate of deposit does not allow for deferral and you are taxed regardless if you take some money or not.

You are only taxed on a portion of the payment. On non-qualified annuities, you are taxed on a Last in First out (LIFO). Meaning, the interest is 100% taxable. On qualified money like an IRA, you will not get taxed on your own contributions.

Annuities: Still a Safe Bet Today

As our nation continues to struggle through the worst recession since the Great Depression, many Americans are gravely concerned about their financial future. Soon-to-be retirees have watched their nest eggs diminish in recent years, and quite a few of them have decided to postpone retirement because they simply cannot afford to stop working. It’s no surprise that studies have shown a steady decline in worker confidence about retirement preparedness over the past two years.

However, despite the recent turmoil in the market, consumers are still confident about at least one type of retirement vehicle: annuities. As a matter of fact, nearly 8 in 10 annuity owners say that annuities make them feel more secure in times of financial uncertainty, according to a study by The Committee of Annuity Insurers, the Gallup Organization and Mathew Greenwald & Associates.

Safe and Sound

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What Are Annuities?

Based on the study, almost 8 in 10 annuity owners say that annuities are still secure and safe and are an important source of retirement security—even in these tough financial times.

It’s really no wonder why investors see annuities as safe, stable options. First of all, annuities are offered by insurance companies—not banks or brokerage firms. Because insurance companies offer conservative savings options that carry very little risk, they have a historical record of stability.

Secondly, each annuity product offered by an insurance company must be approved by the state Insurance Commissioner, which ensures that these products offer the utmost stability. Almost 9 in 10 surveyed annuity owners say that annuity contract guarantees are a very important benefit of the product.

Reliable Retirement Income

According to this recent study, a whopping 86 percent of annuity owners believe that annuities are an effective way to save for retirement and 89 percent say their annuity was a safe purchase. More than three in four annuity owners say that they intend to use their annuities for retirement income. Because annuities offer a guaranteed minimum rate of interest, these products are particularly appealing to those saving up for retirement.

Plus, annuity owners also enjoy the following benefits:

Income tax deferral until withdrawal Penalty-free withdrawals to cover emergencies Protection from creditors (in most states) Complete control over their money if circumstances change Probate-free transfers at death The right to convert to a guaranteed lifetime income

Plenty of Other Uses

Although annuities are extremely popular with soon-to-be retirees, these products can be used for purposes other than retirement income. Based on the survey, 83 percent of annuity owners intend to use the income as a financial cushion in case they or their spouse live well beyond their life expectancy, and 81 percent say they save into an annuity because they don’t want to become a financial burden on their children.

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Because annuities are relatively conservative products, they are certainly not get-rich quick schemes. However, because they are stable, secure and reliable, annuities are ideal for retirement saving. Even in these uncertain economic times, the majority of investors still feel that annuities are a safe bet.

When it comes to annuities, you have a number of different options. If you still have a few years left in the working world, you may choose to purchase what's known as a deferred income annuity. You can contribute to a deferred annuity throughout your working years, and when you retire, you'll begin receiving income from the annuity.

On the other hand, you can purchase a deferred income annuity upon retirement. In this case, you would purchase the annuity with a lump sum. You can then set up the annuity so that your income stream would begin at the age 85 or whatever age you choose.

Another type of annuity that's growing increasingly popular among retirees is the immediate annuity. When you purchase a fixed immediate annuity at retirement, you pay a lump-sum to the annuity company. You'll then start receiving a guaranteed monthly check immediately, and you'll continue to receive this monthly income for the rest of your life or a specified period of time. A portion of this income is considered a tax-free return of your principal.

With a fixed immediate annuity, the monthly amount you receive depends upon the size of your initial lump sum payment, current interest rates and your age and gender. The older you are, the more income you'll receive.

Annuity Advantages:

1. Tax Deferral2. Avoidance of Probate3. Guarantee Income for Life4. You can control your money from the grave.

Deferred Annuities

A deferred annuity allows the owner to defer taking payments from the annuity until a later date in the future. A deferred annuity accumulates interest for a certain amount of years. Some owners do not need to take payments and wish to defer payments so they will not be taxed on money they do not need.

Accumulation Period or Deferral Period3

The accumulation period is when the annuity is growing or accumulating interest.

Examples of Deferred Annuities:

Fixed Annuities Fixed Index Annuities Variable Annuities

What is a Fixed Annuity?

A fixed annuity works like a CD. You receive a guaranteed interest rate for a certain amount of years. An example would be 5% for 5 years.

What is a Fixed Indexed Annuity?

A fixed indexed annuity (FIA) is an annuity allows for a greater chance at higher interest than a traditional fixed annuity but without the risk of market losses as in a variable annuity. You can choose a FIA that is tied to an index such as the S&P 500. Your gains are locked in every year and share in the market gains but none of the losses.

What is a Variable Annuity?

A variable annuity (VA) is another annuity that uses sub accounts or mutual funds to credit interest. Variable annuities a great for people who do not mind market risk.

Shared Characteristics

Retirement income or payments The method of purchase is the same Same payout options are available Accumulation periods

Important Differences

The differences between variable and fixed annuities are:

No guarantee of principal The owner bears a all investment risk

Variable annuities are regulated by the State and Federal Government

What is an Immediate Annuity?

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An immediate annuity (SPIA) allows you to start taking income right away or defer the income up to a year from the policy issue date.

In most cases annuities allow withdrawal at least once a year without paying company withdrawal charges (10 % of the accumulated value). The other way to receive your income is through systematic withdrawals. Systematic withdrawal program allows the investor to get a flow of money monthly, quarterly or yearly depending on the choice of the investor.

By opting for a systematic withdrawal plan one can start or stop the income payments when needs change. You can also get the amount of payments increased or decreased accordingly. Without giving up the control over your money you can enjoy the benefits of tax deferral.

Payout Period

This is the time when the insurance company begins payments to the owner or annuitant. The annuitant will be offered multiple options for their payout. The annuitant may choose an income for life or a payment for 20 years certain only or a combination of a period certain plus life.

Qualified or Non-Qualified

Qualified annuities are just like an IRA, Roth IRA, or your 401K. The money has not been taxed. When you take the money out, the proceeds will be 100% taxable at your tax rate. If you take money out before 59 ½, you will receive an IRS penalty. Roth IRA Annuities are not taxed during the accumulation or during the withdrawal phase.

Non-Qualified (NQ) contributions to a NQ annuity are not tax deductible. The money can come from a CD, checking account, mutual funds, stocks, and a 1035 exchange from another NQ annuity.

Countless Advantages

Like traditional pension plans, annuities offer numerous advantages to retirees. First and foremost, a fixed annuity will provide guaranteed stream of steady income. Through market ups and downs, you'll continue to receive a consistent monthly payment that will never change. In other words, annuities offer predictable growth and stability without the uncertainties that go hand in hand with stock market investments.  

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Secondly, annuity payments can help fill in the gaps that Social Security and other retirement income may not cover over your long lifetime. Statistics show that U.S. retirees are living increasingly longer lives. As a matter of fact, recent life expectancy estimates show that a healthy 65-year-old man has a 24% chance of living to the age of 90 or older, and a healthy woman has a 35% chance of living that long. While this is great news, many seniors are outliving their money. An annuity can provide you with the extra income you may need to fund your later years.

Annuities also offer some valuable tax advantages. First of all, fixed annuity earnings are tax deferred. While there is a set withdrawal term, you only pay taxes on interest earned when you actually withdraw money from the annuity. This means that you end up earning an increasing amount of money with fixed annuities because the deferred tax on your interest remains in the investment instead of being paid out to state and federal taxes each year.

On top of everything else, annuities are extremely safe investments-something that's become increasingly important in today's tough economy. As compared to banks and brokerage firms, insurance companies have a historical record of stability. This is largely because insurance companies offer conservative investment options that carry very little risk.

Because of the strong protections the insurance industry has in place, no insurance policyholder has ever lost a single red cent of their invested principal with an insurance company. That's why fixed annuities are a safe bet for any investor-even in today's volatile market.

In addition to these advantages, annuity owners also receive the following benefits:

Income tax deferral until withdrawal Penalty-free withdrawals to cover emergencies Protection from creditors (in most states) Complete control over their money if circumstances change Probate-free transfers at death The right to convert to a guaranteed lifetime income

If you want to learn more about how you can create your own pension plan with income annuities, please give us a call.

Guarantees and payment of lifetime income are contingent on the claims paying ability of the issuing insurance company.

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Annuities - Low Risk Solution to Smart Money Management

Today, more and more investors are changing their minds about the amount of risk they can tolerate and are looking for a safe investment. Many of them are finding their slice of risk-free heaven in fixed annuities. 

Annuities may not be the hot topic at cocktail parties, but they are happily discussed by seniors who are living off of them right now. Fixed annuities are an excellent choice to put aside serious money for future needs. Nothing else-not corporate bonds, municipal bonds, variable annuities, government notes, mutual funds, CDs or any combination of the above offers the unique benefits, safety, and tax deferred accumulation of assets that annuities do.

Fixed annuities provide a predetermined rate of interest that is contractually guaranteed. Most fixed annuity contracts have a fixed guaranteed rate anywhere from 1% to 5%. Some offer bonuses as well. Annuities also provide for either a lump sum or annuitized (monthly, quarterly, annual payments) withdrawals. Unlike CDs, ordinary income taxes aren't due while the funds accumulate, but instead are deferred until withdrawal. In most cases your tax bracket will be lower during retirement than in your working years, which makes the deferred taxation of funds a huge benefit. In addition, since the interest payments are not taxed while the annuity is in its accumulation phase, the funds grow faster and the accumulation is larger!

Should you put all your money in annuities?  The obvious answer is no. Diversification continues to be the right approach to prudent investment and money management.

The History of Annuities

Annuities were invented by Babylonian landowners in approximately 1700 B.C. They set aside the income from a specific piece of farmland to reward soldiers or loyal assistants for the rest of their lives. Today’s annuities substitute cash for farmland; however the concept is the same.

Annuities have been around for hundreds of years. Matter of fact, annuities or "annua" were bought by Romans during the Empire in which the citizens of Rome would make a one- time lump sum payment for a yearly stipend for the rest of their lives.

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During the 17th century, countries like England were constantly trying to fund their battles and needed a revenue source. The English government sold annuities to people with a promise to pay later. As people would die, the payments to the living policy holders would increase.

Early trade between the colonies and England also involved annuities. Many annuity contracts were issued in England to benefit family members still residing there in return for raw goods shipped from the colonies. The annuity contracts were known as annunimums and were very popular as a method of trade and safety. King Charles II even used an annuity to reward development of the Island of Martinique and Grenada prior to the concept of a fixed money standard.

Benjamin Franklin was an early supporter of the concept of annuities and in his will left two annuities to the cities of Philadelphia and Boston. The Boston annuity lasted until 1993 when the city officials voted to end the annuity and use the lump sum that remained.

In 1759, a group of Ministers in Pennsylvania started their own annuity group whereby they would contribute to an annuity for a promise to receive income for the rest of their lives as well. These survivorship annuities were issued by church corporations for the benefit of ministers and their families.

During the Civil War, many annuities were awarded by the United States to military members in lieu of land ownership. The idea was supported by President Lincoln prior to his death as a method of assisting injured or disabled military personnel. After the Civil War, then President Grant rescinded many of these annuities on the grounds that the benefits far outweighed the contribution. A legal battle ensued and the Supreme Court heard the case a few years later and restored the benefits.

In early 1900s annuities were used in partnership with the sale of bonds because of the New York Stock Exchange collapse of 1903. The reason being the safeties of the bond issuers were often in question and an insurance company was a third party to help guarantee and provide futurebenefits. This stability allowed the country to help restore confidence in the financial sector.

At one time banks were also allowed to sell annuities and often times issued their own annuity products. During the financial turmoil of 1919 individual states set up rules making to illegal for banks to enter into

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annuity contracts unless the product was issued by an insurance company. This set the guidelines today for the absolute safety an annuity provides.

During the Great Depression people were buying annuities because insurance companies were thought to be a safe place to put their money outside of banks and the stock market. Annuities were popular until the "New Deal" when President Roosevelt rolled out Social Security.

One of the more famous stories is of the baseball legend Babe Ruth who invested 100% of his funds in annuities. He said, “I may take risks in life, but I will never risk my money, I use annuities and I never have to worry about my money.”

In 1952, the first Variable Annuity was born which allow people use their cash value to participate in the variable markets. In the 1990's, Index Annuities came out and billions a year have been sold ever since. Index annuities allow you to share in the upside market gains and none of the downside losses.

The biggest wealth transfer in history as already started as Baby Boomers have already started inheriting assets from the Greatest Generation of all, their parents. 2010 represents the start of the great flood of Baby Boomers punching their tickets with the Social Security system. The largest amount of people in history will be retiring and most insurance industry insiders believe 2010 will mark the beginning of Golden Age of Annuities.

Many Baby Boomers will buy annuities to supplement their retirement nest eggs, however I the Golden Age of annuities will not be seen until their kids, the Generation X and Y retire.

Generations X and Y will see traditional entitlement programs, pensions, and Social Security change by the time they are old enough to punch their retirement tickets. These generations will need an income they cannot outlive even more than their parents. Annuities can provide many guarantees which will be very attractive to all generations.

Annuity Benefits:

· Principal Guarantee

· Min. Interest

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· Guarantee Lifetime Income

· Tax Deferred Growth

All of the above mentioned benefits are nice and will benefit some people however; the most important benefit will be guaranteeing an income for the rest of your life no matter how long you live.

Some annuities will allow your income amount to grow from 5-8% a year until you start to withdrawal the money. Your agent can easily show you how much income you will be able to take out a year for the rest of your life. These numbers are real and are not based on hypothetical pie in the sky numbers.

As you can see, annuities have grown and will continue to grow in popularity among the masses. Annuities offer many benefits and people will be able to take advantage of many of the different benefits. The industry will continue to build and come out with new benefits and features to their products. The Golden Age of Annuities has only just begun.

Benefits of Annuities

Wharton Study Says Annuities Are Best Asset Class for Generating Retirement Income

A recent study, co-sponsored by the Wharton Financial Institutions Center at the University of Pennsylvania and New York Life Insurance Company, reveals that lifetime income annuities are the most cost-effective and least risky investment for creating guaranteed retirement income for life. The findings are described in a paper entitled Investing Your Lump Sum at Retirement, co-authored by Professor David F. Babbel of The Wharton School and Professor Craig B. Merrill of The Marriott School of Management at Brigham Young University. Their research explores various financial options for retirees in terms of their ability to generate maximum retirement income at the lowest cost.

Babbel and Merrill began their research because they believed that living too long is increasingly becoming the major financial problem of the 21st century. They were also concerned with the fact that too few people take advantage of annuities. Their research substantiates their belief that only lifetime income annuities can protect individuals in an efficient way from the risk of outliving their money. In addition, they also showed that individuals couldn't achieve these same results with mutual funds, certificates of deposit, or what they describe as "other

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homegrown solutions." The researchers concluded that income annuities should be more widely used, especially since insurance companies are reliable and inexpensive sources of guaranteed retirement income.

Here are some of the other findings that were outlined in their paper:

Income annuities can provide secure income for one's entire lifetime for 25-40 percent less money than it would cost an individual to provide a similar level of lifetime income through traditional means, thanks to an insurer's ability to spread risk across large numbers of people.

Equities, fixed income and other investment products like mutual funds carry the risk of outliving one's nest egg.

By covering at least basic living expenses with income annuities, consumers have much greater flexibility in other areas of a retirement plan, including the ability to take more investment risk with the remaining portfolio.

The researchers also concluded that most of the reasons why people avoided buying annuities in the past have been eliminated. Insurance companies have worked to modernize the product so that it includes features such as access to cash when needed, inflation protection, and the ability to leave an inheritance. Combine all of these factors and the evidence is overwhelmingly in favor of at least considering an income annuity as part of one's retirement portfolio.

10 Benefits of Annuities

Tax Deferred Growth- The interest earned is not taxed until it is touched. Your funds grow tax deferred. Tax Deferred means tax diminished.

Safety- Annuities are among the most guaranteed and safe investments available. “Annuities are boring, they are safe and secure.”

Avoid Probate- Annuities transfer directly to a beneficiary without the need for probate. Annuities avoid probate; the funds go directly to your heirs immediately and without delay.

Income- At any time, annuities can change from a savings or accumulation vehicle. Annuities are the only financial vehicle that will guarantee you and income that you never outlive.

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Estate Planning- Annuities are used in estate planning to help protect assets.

Interest Income- Interest is available after the first 30 days. The interest is available monthly, quarterly, or annually.

Death Benefit- Your beneficiary always receives the full account value in case of death.

Fees- No Fees, no charges, and no commissions.

Comparison- Interest rates on annuities are usually higher than CD’s. Look long term with annuities.

Access- 4 Ways to access your money. Interest, 10% free withdrawals, annuitization, and death.

Supplement Your Retirement Savings with Annuities

Saving enough money for your retirement can be a daunting task. Perhaps you are disciplined enough to put aside a portion of your income each month, but what is the best way to make that money grow? In addition to your 401(k)s and IRAs, you may want to consider an annuity.

There are many reasons why annuities are such popular vehicles for retirement savings. For most retirees, their greatest worry is outliving their assets. Savings within an annuity can be converted into a series of steady income payments (called annuitizing your contract). You can choose to receive these payments for a set time period, or can elect a guaranteed income for life, a feature only available in annuities. Inflation is another factor affecting whether you will have enough income to live on throughout your retirement. With an annuity, your earnings accrue tax deferred, allowing your savings to work harder for you to help fight inflation.

The death benefit provided by annuities is a lesser-known attribute. With an annuity, all death benefit proceeds pass outside of probate (if payable to a beneficiary other than the estate) so your beneficiaries avoid lengthy delays in receiving your bequest. Furthermore, if your spouse is listed as the primary beneficiary, he or she may have the option to assume ownership of the annuity, thus continuing to accrue earnings on a tax-deferred basis.

So what exactly is an annuity? An annuity is a contract with an insurance company where you deposit money into the annuity and

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receive payments beginning sometime in the future at regular intervals. There are several types of annuities available to meet your individual needs.

A fixed deferred annuity allows you to make a single lump sum deposit, or several contributions over time, with the option of receiving payments beginning at a particular date in the future. This annuity option is best for saving money over the long-term towards retirement.

A fixed immediate annuity is the same except annuity payments begin right away or within a short time after a lump sum deposit is made. This annuity option is best if you would like to convert existing savings into a guaranteed income stream right away.[2]

There are other types of annuities that offer variable investment divisions, such as equities and bonds. Variable annuities also allow your earnings to accrue tax deferred. This type of annuity would be more appropriate for individuals looking for potentially higher returns, but who are also willing to take a higher risk to achieve that goal.

In summary, the benefits of annuities are numerous and an annuity may provide you with the exact type of savings vehicle you need in order to plan for your future. Contact your financial adviser today with questions, or for assistance in finding the right type of annuity to meet your future retirement goals.

Withdrawals of earnings are subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty. Your annuity contract may be subject to a contingent deferred sales charge (CDSC).

Immediate Annuities

It is good to know that there are willing people who can help you invest for your future. Presently, annuities are widely used and there are a few different types of annuities to choose from. Each of them has offers different characteristics and they work differently. If you are thinking of investing in annuity, here are its different types:

There are two basic types of annuities. They are immediate and deferred annuities.

Immediate annuities pay you an income within thirty days of policy issue, while a deferred annuity allows for your cash value to

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accumulate on a tax-deferred basis regardless if you take a withdrawal or not.

An immediate annuity premium is either paid in one lump sum or by installments paid over for a number of years, in return the policyholder will receive a specific amount each year, the payment can be yearly or monthly up to the policyholder's discretion, and the duration either for life or a specified number of years.

An immediate annuity is also called a life annuity, unlike life insurance, it provides no death benefit to the buyer, this is suitable for those who are about to retire or have already retired. The premium of the policy is normally paid as a lump sum at the time of purchase.

A Life annuity is a kind of financial contract which is signed between the insurance companies and you. In this particular contract you are guaranteed certain amount of money which is to be paid to you by the insurance company within a certain period of time. This however depends on the type of annuity that you opt for. Guaranteed term annuity can be paid to the beneficiary or the spouse.

Term certain annuity offers a fixed monthly income till you are 90 years old. If the insurance holder dies before he turns 90, the payments are made to the spouse till she reaches 90. The minimum term for this kind of annuity is about 3 years. While if you are looking for the maximum limit, you will benefit from the 40 years term which is the highest in this case.

The income payments of an immediate annuity begin within 12 months after the buyer purchased the policy. It is designed to pay the buyer a determined amount of money on a monthly to yearly basis.

The rate of an immediate annuity can be fixed or variable, a fixed-rate offers the buyer a fixed income whereas the variable-rate can fluctuate depend on the performance of the selected investments. This policy is suitable for those who have retired or going to retire.

The policy can be purchase under immediate payment, single payment deferred or periodic payment deferred method. Under immediate payment method, the buyer will pay the insurance company in a lump sum. This is an option used by people who are getting ready to retire and want to get payments immediately, usually 30 days after payment is made.

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Immediate Annuities are known by a few different names, they are:

Immediate Annuities Single Premium Immediate Annuities (Spia) Life Annuities Income Annuities Payout Annuities Fixed Income Annuities

What Makes an Immediate Annuity So Special Anyway?

A recent survey commissioned by the Metropolitan Life Insurance Company's Senior Marketing Institute discovered that many people, if not most, do not fully understand or appreciate the unique qualities of the typical income annuity contract. Furthermore, the situation is made more difficult because too many "financial experts" writing in various publications do not fully understand them either. This product is too important not to be understood correctly by the people with the greatest need for it!

In its most simplistic form, the buyer of an income annuity contract, in exchange for a lump sum of money, is unconditionally guaranteed to enjoy a specified income for the rest of his life, whether he lives to age 70 or to age 120.  No other investment or savings account can do that.

A simple illustration can put all this into perspective. Let us assume that Mr. Jones purchases an income annuity contract from the XYZ Life Insurance Company. He has done his homework, thoroughly checked out the company's financial history and is satisfied that the company will be around to honor its commitment. This is perhaps one of the first and most important things anyone can do. Because annuities are long-term contracts, you want to be sure the company will be there ten, twenty, or fifty years into the future.  Many insurance companies are already revising their mortality tables, and extending the life expectancy to 120 years from the old assumptions of 100 years.

The next step is to determine what he will receive as an income. (Again shop around because payout rates vary.) But for this example, let us assume that he decides the XYZ Insurance Co. contract is competitive. He decides to set aside $250,000 into the annuity. XYZ Insurance Company prepares a quote that guarantees him $1,200+ per month for as long as he lives.  Aside from all the other positive considerations including tax benefits, there isn't anything in the market place that can compare.

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Consider that at age 65, Mr. Jones has a life expectancy of about 24 years. To achieve the same income level, his $250,000 would have to gross at least 2.85% every year for the next 24 years! What are the chances of that happening? Slim to none.  Look at what has happened to the stock market, CDs, Treasury Bills, Corporate Bonds, Mutual Funds, and so on over the last three years.  You can readily see the unparalleled opportunity and benefit the annuity offers and without any worries whether the income will be there each month.

Finally, suppose Mr. Jones is one of those lucky people with good genes. Instead of living 24 years, he lives 34 years. What does he do? With the annuity, Mr. Jones doesn't have to worry as he would with any other type of investment.

Create Your Own Pension with an Immediate Fixed Annuity

Remember when pensions were part of every job and every retiree had one? Pensions were great; they paid the pensioner a fixed sum each month for his or her entire life and in most cases, at least a portion was paid to the surviving spouse at death. While pensions may be a thing of the past, the concept of a qualified retirement benefit that pays a guaranteed monthly amount for life is not. Instead of a company pension, they now take the form of self-funded immediate fixed annuities.

Immediate fixed annuities may as well be a distant cousin to pensions in the way that they provide and guarantee a retirement benefit. Some of the similarities include:

A guaranteed monthly payment for the life of the annuitant, regardless of the actual growth of the underlying principal.

Optional death benefit for surviving spouse - for a smaller monthly payout, if the annuitant dies before he or she has received enough payments to equal a return of principal, their beneficiaries will continuing receiving funds.

Annuities, like pensions, offer a low-risk, guaranteed return. While this return may not be as substantial as that of more high risk investments, it is perfect for conservative retirement planning.

While many aspects of the two retirement benefits are similar there are also many differences. The most important difference between the two is that an annuity is self-funded whereas a traditional pension is funded by the pensioner's employer. This difference introduces a number of considerations that you must make before you buy an annuity.

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Considerations that would not matter in an employer-sponsored plan, like:

Because annuities guarantee you a certain payout based on the original contribution, you generally can't remove additional funds after you've purchased the annuity. That means that if you put your life's savings into an immediate annuity you may no longer have access to the funds in the event of an emergency. Now there are some newer products on the market that do offer increased access to funds, but you usually give up something in return such as a lower monthly payout.

If you do have access to the funds and you remove a lump sum there will be surrender charges imposed. This could not only negate any interest growth you've experienced but could cut into your principal and will reduce the monthly income paid out by the annuity.

Your heirs will generally not inherit any of the remaining annuity value after your death. While this may not be a concern in an employer-sponsored pension, it should be considered when making a contribution to a straight life immediate annuity.

If the concept of an annuity for funding retirement benefits appeals to you talk to your agent about the many flexible annuity products available. You may find that while a straight life immediate annuity does not fit your needs, a joint and last survivor or period certain annuity does.

Deferred Annuities

"One of eight wonders of the world: tax-deferred compound interest" Albert Einstein

The Triple Compounding Advantage

Interest Interest on your Interest Interest on money that you would have paid in taxes.

Deferred Annuities are by far the most popular annuities in the world.

How do they work?

If you decide to invest in a tax-deferred annuity, you do not have to pay taxes on the earnings you get from your investment until you decide to take out your money from the investment plan. This means that as time goes by, the income from the investment or savings plan will grow

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faster as compared to annuities that do not defer tax payments. This is because this set up allows you to compound your earnings and reduce the taxes you would have to pay in the long run. People who invest in tax-deferred annuities also have the option of either paying for the investment in lump sum (single premium) or in monthly installments (flexible) without affecting the guaranteed earnings they receive.

Types of Tax-deferred Annuities

There are three types of tax-deferred annuities: the fixed annuity, indexed annuity, and the variable annuity. The first two types are designed to guarantee you a minimum rate of interest on your investment without experiencing any loss on your principal investment.

On the other hand, variable annuities are greatly dependent on market conditions, which means that it is the riskier option because you run the risk of losing your principal investment when the market does not perform well.

In recent years, a preferred investment option is to invest in annuities, which can be very profitable for all types of investors. Among the different types of annuities, one type that has become very popular is the tax-deferred annuity, which allows a person to defer tax payments on earnings up until he takes out money from the investment, which, in the long run, means higher growth potential of a person's accumulated earnings.

Three Types of Deferred Annuities

Fixed Annuities

Fixed annuities are the most convenient way for you to calculate the exact payment that you will get. In this manner, you are requested to invest an exact amount of money and state the exact years before you want to withdraw them. From their declared rates, you can calculate how much payment you will receive each year.

Indexed Annuities

Indexed annuities is a hybrid between fixed and variable when it comes to both potential and risk return. In this type of annuity, you can get higher return compare to fixed annuities.

Variable Annuities

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A variable annuity is the one of the annuities that gives freedom to their investors. If you wish to invest in stocks, mutual funds or any other types or normal investment is possible. Moreover, this type of annuity is not as secured as fixed annuities. But if you will compare, you will get higher benefit from the variable annuity. The only things that you can be feared of are the risks you may take. I

Variable annuities invest in subaccounts and are managed by fund managers and work similar to various mutual funds. Your gains grow tax-deferred but you will be exposed to market risk, fees, expenses, and turn over ratio’s.

These annuities are for people do want market exposure and are willing to pay the associated fees that come with this type of annuity.

Fixed Annuities

Fixed annuities are the easiest annuities to understand. They offer a declared rate for a specified period of time.

Example:

5% for 5 years. After the 5 years is over, you can either continue with the same carrier with a new interest rate or you can have the option of moving that money to a new carrier with a new rate.

Fixed annuities are also known as CD annuities because they closely resemble and have one characteristic of a certificate of deposit.

CD Annuities are insurance products that ensure a guaranteed rate of interest on the money that is deposited till the policy natures. It doesn’t matter how long the maturity period might take, 5 years or 15 years, the same interest rates will be provided. CD annuities are usually offered by credit unions, banks, and insurance companies and are sold by insurance agents.

In simpler terms, CD annuities can be described as a kind of a savings account. This means that there is no risk element involved in creating a CD account as they are fully insured. The difference between a savings account and a CD account comes from the fact that a CD annuity is provided for a fixed period of time which can range from 5 months to 5 years.

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The interest rate offered is also fixed for CD annuities. In most cases, the bank or the financial institution would provide CD openings with the intention of keeping it till the maturity date.

Once the policy matures, the investor is given two choices. He or she can either withdraw the money or transfer the money into another investment annuity program for a couple of more years. If the policy holder decides to withdraw his or her funds, it can be done without the surrender charges being required to be paid as long as you do not take out more than the allowed amount of either interest only or up to 10% depending on the policy.

At the time of the withdrawal, if the policy holder is not 59 1/2 years old, he or she will be charged an IRS penalty of 10% on the earnings.

The usual policy rules when it comes to interest rates on CD annuities are:

• The larger the principal amount, the greater should be amount of interest received. But this is not a fixed rule and sometimes it is not followed.

• If you plan to invest in a CD annuity for a longer period of time, most insurance companies would provide you with higher rate of interest. This trend might not be followed during periods of financial depression or time periods that precede a recession.

• Certain smaller insurance companies might offer greater interest rates than bigger ones in the hope to attract greater number of investors.

Fixed Annuities: Escape from Stock Market Uncertainty

Investors, especially those that experienced considerable losses and watched helplessly as their investment portfolios fell to pieces during the last stock market crash, are making much more cautious investment decisions today. A fixed annuity has gained a great deal of investor appeal for many cautious investors. Compared to alternative investments of equal risk, the fixed annuity has several significant advantages.

Fixed Annuity Advantages

There is the chance of significant appreciation when a lump sum is invested into a tax-deferred annuity, and the process is much quicker than a savings account or CD. The element of tax deferral is one of the

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most appealing advantages. Unlike other options where earnings are taxed each year, the tax-deferred annuity also allows taxes to be delayed or deferred until the money is withdrawn.

Another attractive fixed annuity advantage is the opportunity for guaranteed lifetime income. There is much debate about the future, potential of insolvency, and possible ineptitude surrounding the Social Security program(s). Many are fearful that the system will resort to a drastic decrease in benefits or entirely dissolve benefits. Comparatively, the guaranteed income of a fixed annuity is much more attractive.

The Baby Boomer generation, in particular, has lost faith in the federal government's ability to contribute to their retirement income. This group is also not very prone to placing faith in the stock market or any volatile index investment. Instead, the Baby Boomer generation tends to opt for the less glitzy guaranteed return from a fixed annuity.

A Closer Look at the Advantages of a Deferred Fixed Annuity

Individuals throughout the nation have billions of dollars invested in deferred annuities. And while these contracts offer countless advantages, including a guaranteed stream of income after retirement, most people simply aren’t aware of the many benefits deferred annuities have to offer.

Let's review some of the features of a fixed annuity:

1. Keeping it Safe

Unlike a bank CD, deferred annuities are not FDIC insured. However, these accounts are usually backed by billions of dollars in the insurance company’s assets. Therefore, deferred annuities are considered safe, low-risk investments.

2. Triple the Interest

Deferred annuities offer tax deferred earnings and “triple compound interest.” In other words, these accounts earn interest on principal, interest on interest and interest on the taxes you would normally have to pay each year on a CD.

What does this mean for you? Basically because of the tax deferral and triple compounding effect deferred annuities offer, you’ll have more money to spend after retirement.

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3.Guaranteed Minimum Interest Rate

Because insurance companies offer minimum guaranteed interest rates on deferred annuities, you can rest assured knowing that you'll never lose money regardless of what's going on around the world.

4. Competitive Interest Rates

Not only are you guaranteed a minimum interest rate for deferred annuities, but you may be able to receive a higher rate than on a comparable CD. Plus, with some annuities, you can lock in your interest current interest rate for certain amount of time if you think rates may decrease in coming years.

5. No Pesky Sales Charges

Unlike some other investments, deferred annuities do not tack on a sales charge when you deposit money. Every last red cent of your initial deposit stays in your account.

6. No “Administration” Fees

With some investments, such as mutual funds, you are charged asset management and administrative fees. You won’t have to pay any such fees with a deferred fixed annuity.

7. Withdrawal Advantages

Withdrawals seem to be the most confusing and misunderstood aspect of deferred annuities. Contrary to popular belief, there are quite a few ways to access money in deferred annuities without paying a penalty, such as the following:

You can withdraw up to 10% from your account each year without a penalty.

If you are diagnosed with a terminal illness or need to go live in a nursing home, you can usually withdraw as much as you want without a penalty.

You can convert some or all of your account to guaranteed income for a certain number of years.

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Some new deferred annuity products allow you to receive a payout at a guaranteed interest rate for the remainder of your life while you retain control of the principal.

8. Protected From Creditors

Depending on the state where you live, the money in your deferred annuity may be protected from creditors if you file bankruptcy.

9. Sheltered from Probate

In some states, your annuity is not considered a probate asset. Therefore, your deferred annuity beneficiaries will not be subject to probate fees or delays.

10. Early Withdrawal Charges

Although there are some charges associated with withdrawing money from deferred annuities, these charges typically decrease over time. After a certain amount of time, charges will no longer apply. For example, once you’ve held a deferred annuity for five years, you can typically withdraw all of your money over the next five or ten years with no charges.

Whereas, if you need access to funds in a CD prior to the maturity date, you may pay an interest penalty ranging from 30 days' to six months' interest.

11. Distribution Options at Maturity

When a CD reaches maturity, you can either cash out or renew it for the same or different maturity period at current market rates.

With a deferred fixed annuity, you may elect to withdraw your money in a lump sum or elect a lifetime income option, which provides an income stream that you cannot outlive. Or you could also let your funds continue to accumulate until a need arises.

How to Choose the Right Fixed Annuity

First, you will want to find a company that has a stable and steady track record, as the annuity will most likely need to last you 10-30 years post-retirement. A sign of adequate financial stability can be found using a Standard and Poor's rating. An "A" rating by a firm like this is usually a good indicator of stability. Make sure to look back at past ratings too; the goal is consistently high ratings for several years.

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Peruse the numbers carefully. An unusually high guaranteed interest rate may be indicative of sizable fees, which will definitely decrease the return on your annuity.

You should also determine if there is a penalty for early withdrawal and the circumstances where the penalty might be waived. Generally, a fixed annuity will have a penalty or "surrender charge" if you withdraw the funds early. The penalty will usually phase out in seven to five years. However, some annuities feature a waiver of withdrawal penalties if you are critically ill or confined to an extended care facility.

Annuities are developed to help people and not to worsen their situation and annuity quotes were developed to help you decide wisely. You as an investor, have the obligation to know if you are on the right track.

It is a well established fact that the government represents 30% of the total retirement income of ours, while the rest of the 30% comes from the company where we work to makes up the rest. There are different types of annuities available these days and it is important that you make a wise decision while choosing the annuities so that you can lead a secured life after retirement and also get a sense of financial security.

Professional advice of an annuity agent can be an invaluable asset when considering a fixed annuity.

Indexed Annuities

An indexed annuity is a type of annuity that is specifically designed for helping policies holders save their hard earned money for their post retirement life.

The equity-indexed annuity (EIA) has been around since 1995, and in its short life has proven to be a fast-growing alternative to fixed-rate annuities and certificates of deposits. And with good reason. Since their inception, these annuities have outperformed both bond indexes and the S&P 500 overall.

Like other annuities, an indexed annuity can also be purchased from an insurance company. The terms and conditions attached to indexed annuities payment will depend upon the contract that you have with the insurance company.

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An indexed annuity can be described as a fusion between a fixed annuity and a variable annuity. Most indexed annuities are purchased through a large single payment that is made up front.

Indexed annuities come with characteristics of both fixed and variable annuities. They provide rates that are dependent upon the performance of the market. But at the same time, they are safeguarded against market losses through a minimum guaranteed payment.

Indexed annuities buy options in the Dow Jones, S&P, and the Russell 1000. The most popular index for indexed annuities is the S&P 500.

Indexed Annuities are also known as:

Fixed Indexed Annuities (FIA’s)

Equity Indexed Annuities (EIA’s)

Here is how they work. EIAs provide a guaranteed interest rate along with the ability to earn a percentage of certain market-driven indexes, mimicking characteristics of both fixed-rate and variable annuities. The percentage of the index's gain that a customer receives varies, with some companies offering 50 percent and others offering 100 percent or even more. 

When the Markets go down, Your Value Doesn’t. You Gains are also Locked In.

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This chart shows you the power of Zero. “Zero is your Hero”

What if the Market Crashes?

Equity-indexed annuities carry a minimum return, but only if you keep the contract until its maturity date. The guaranteed return is usually 3 percent, but may not be 3 percent of your original contribution. Some companies guarantee you will get at least 3 percent of 90 percent of what you spent.

It is important to note that every equity-indexed annuity is different, and there are several questions you should ask your agent or broker before deciding to invest.  Some of the best questions to ask are:

What is the time period on the annuity?

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With an equity-indexed annuity, your money will be tied up from a required five to ten years. Similar to any other stock investment, the shorter the term, the greater the risk the stock market won't perform well over the holding period.

What will you earn when the market goes up?

Equity-indexed annuities credit you anywhere from 50 to 100 percent of the price gain of the market, excluding dividends. The percentage rate you earn can vary from year to year, so make sure you check with your agent on the details.

At the end of the term, how does the company calculate your earnings?

It depends on the individual annuity.  Some equity-indexed annuities use the market price on the day your annuity matures. Others measure the market price on each anniversary and pick the highest one. Some policies average the gains, while others credit you with a portion of each year's market gains. To make the best decision, make sure you understand which method the policy you're considering uses.

Are there any earnings caps?

Equity-indexed annuities often put a cap on yearly earnings, and some policies allow the insurer to change the cap annually. Ask your agent for further details on this topic.

What happens if the market trends down?

If the market drops one year, you will be credited with no gain that year. The crediting method the company uses will drive what happens in subsequent years, especially if the market doesn't return to previous levels.

The Pros:

Assurance of higher returns in comparison to a standard annuity Guarantee of minimum money return despite stretched market

condition Easy participation in the stock-market without worrying over losses

or gains Preferable for those individuals who are not very close to their

retirement 10% free withdrawals Nursing Home Waivers

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Terminal Illness Waivers Income for Life Riders

Taxation

Qualified equity-indexed annuities benefit from tax-deferred growth in the accumulation phase. Tax-deferred growth with eventual income taxation is far superior to accumulation with lower taxation. The downside to this tax benefit is that tax authorities treat annuity payments and distributions as income and not capital gains.

As a result, the income tax bracket is applied instead of the less-burdensome capital gains tax. However, the benefit of tax-deferred growth makes the eventual tax implications a lot more palatable.

Guaranteed Lifetime Income

One of the primary merits of an annuity is the provision of guaranteed Lifetime Income. The Fixed Indexed Annuity provides this important feature as well.

Assess your situation to see if indexed annuities are right for you. The product often fits perfectly into your portfolio if you're a soon to retire or younger retiree and you want to avoid risk.

Another factor in deciding which of the indexed annuities is best for your situation is your need to access the funds. Some people simply want the tax deferred growth provided by the annuity and a higher potential for growth. They have enough assets to know they'll never use the funds and simply want to pass them to heirs.

There are several variables involved in the calculation of the total return and consideration has to be given to each factor.  These variables can be either fixed for the life of the annuity, or adjustable by the insurance company at specified dates.

1) Participation rate.  The participation rate is a measurement of how much of an index's gain will be credited towards your annuity contract.  For example, a participation rate of 90% on an index gain of 10% will result in a 9% gain credited to your account.

2) Asset Fees.  An asset fee is a charge made against the index return.  It may be in place of, or in addition too, the participation rate.  If an asset fee is set at 3% for example, and the index has a gain of 8%, the total return will be 5%.

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3) Caps.  Some annuities place caps on your return regardless of the index's performance.  Any excess over the cap is lost to the annuity holder in this case.

The exact method of calculating the index's return over a certain time period also affects the return paid on an Equity Indexed Annuity. 

Here's a Brief Overview:

The Point-to-Point method compares the change in the index between two distinct points in time. The return can be affected by short-term fluctuations in the index to a much larger degree with this method, should they happen to fall on a calculation date.

The High Water Mark method offers somewhat more protection.  In this method, the value of the index is recorded at several dates in the term. The highest value is used in comparison with the beginning value to calculate the return.

An Annual Reset compares the value of an index at the beginning and end of the year.  Gains are then locked in for that term.  Since most contracts have a guaranteed rate of return, any drop in the index results in the minimum guaranteed return.

Averaging simply takes the index value on a daily or monthly basis and creates an average value over a certain term.  This has the effect of smoothing out the return and offers some protection against volatility.

Mutual Funds vs. Annuities

A Great Investment, but…

Mutual funds are a seemingly great investment. They allow any investor to buy a portfolio of stocks and bonds without having knowledge of the stock and bonds markets. Additionally, they allow the investor freedom from the day-to-day monitoring of his portfolio. They provide diversification and management by "professionals." So what could be bad about that?

Nothing is wrong with mutual funds except that some investors do far worse than they should because they do not really know what is going on with the average mutual fund. If you think selecting funds is easy

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(as many have come to believe during this rare, everlasting bull market), once you read this report, you may think differently

You Will Learn:

• About the total fees that you pay. • That often, the mutual fund you select isn't what you think. • That you may be investing in securities you don't want. • About building a portfolio of funds that complement each other rather

than replicate each other. • That many funds generate far more taxes than you want to pay. • That some mutual fund "professionals" may not be worthy of your

financial trust.

Annuity Campus Does Not Provide Legal or Accounting Advise, Please consult with your professionals; attorney and accountants.

Have you ever seen those mutual fund advertisements with mouth-watering returns of 40% or 50% in the last 12 months? You then decide to invest some of your sluggish funds and jump into these "winners." And then as soon as you get in, these "winners" turn to losers and start declining in value. Do you ever feel you might be financially jinxed, that as soon as you get into an investment, it declines?

As pointed out in the Eric Tyson study and Money Magazine, this "hot streak" phenomenon is often followed by a steep decline in the fund's performance. Some mutual funds are loaded with fees, which is not necessarily bad. If the fund is making you a return that you're happy with, then high fees are not a problem. But as an informed investor, you should understand the truth about the fees in any fund you invest. You should know what you're paying - don't you think?

There are generally three types of fund fees (one of which the funds do not discuss in their prospectus):

Operating Expenses: (Including management fee) These fees pay the smart people who actually buy and sell the securities in your fund and do the investment research. In addition, these fees pay the accountants and attorneys who audit the fund, prepare the prospectus, and provide professional oversight. These fees also pay the members of the board of directors. Also included are printing and postage expenses.

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All funds have operating expenses, as no fund will manage your money for free. However, some funds have operating expenses a lot lower

than others do. A few funds have expense ratios less that 1/10th of 1%. At the other extreme, there are a handful of funds that sock their

stockholders for 5% annually and more! So it pays to shop!

12b-1 Fees: These are fees that the fund takes from your account to "distribute" the fund (which means advertise for new fund shareholders and pay securities brokers to provide you service). It may seem a little unfair that your money is being used so that the fund can attract new investors and have your securities broker convince you to remain in the fund. But that's exactly what a 12b-1 fee does. Some funds have 12b-1 fees, others do not.

Turnover Costs: The prospectus of every fund shows you the fund turnover, but does not translate that into what turnover actually costs you. Turnover measures how often the fund is buying and selling. A fund with 100% turnover means that it completely turned over its portfolio during the year. Other funds, index funds for example, which are designed to match an index such as the S&P 500, have turnover rates less than 10%.

When a fund buys, its massive purchase can push up the price of the security. Similarly, when a fund sells shares of a stock, the massive selling can push down the price of the stock. For example, if a stock has a price of 100 in the morning and the fund start accumulating 1 million shares, maybe the price of the stock is pushed up to 102 by the end of the day. When the fund starts buying again in the morning, it will be paying the higher figure. Thus, buying and selling for a fund can be expensive for its shareholders.

This cost of turnover was estimated in the Financial Analysts Journal as

costing 6/10th of 1% for each transaction. So for a fund with a 100% turnover, the costs would total 1.2%.

When you add up the operating expenses, the 12b-1 fee, and the Turnover costs, it's not hard for a fund to have total costs exceeding

4%! So if you have $50,000 invested in the fund, which costs you $2000 every year. That may not be so bad until you take a look at the taxes.

Taxes

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When you buy individual stocks, you get built-in tax deferral. You pay no capital gains tax until you sell your shares. Not so with a mutual fund. Every time the fund sells a stock for a profit, you must pay tax on your share of the profit, even if you have not received any distribution. The gain incurred by the fund may be a long-term capital gain (taxed at federal rates up to 20%) or the fund may have short-term capital gains (taxed at up to 39.6%). Each year you receive a 1099 form to disclose on your tax return and you pay taxes on these gains (in addition to the dividends).

Here's the worst irritation - these taxes are even higher in years when the market falls and fund investors create net redemptions in the fund. When more fund shareholders want to sell than buy (which usually happens when the market is falling and investors get scared), the fund will sell its holdings in order to create cash to pay the selling stockholders. These sales by the fund of its stocks often create capital gains and these will be reflected on your 1099. So in years when you watch your fund decline in value, you also get the biggest tax bill!

Here's an option. Many fund managers also manage sub-accounts within variable annuities. In many cases, these sub-accounts are almost identical to the mutual fund managed by that same fund manager and reflect the fund manager's style. The great aspect of variable annuities is that you do not receive an annual 1099. Rather, when you liquidate portions of your variable annuity, you will pay tax on the gain at ordinary income rates (up to 39.6%).

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So there is a tradeoff of avoiding taxes each year yet potentially paying a higher tax later. Additionally, variable annuities provide a death benefit, which carries a cost. The only way to determine if a variable annuity would be a savings for you is to run an analysis for your personal tax situation. Your tax preparer or your financial advisor should be able to assist you.

Turnover

The turnover rate in a fund is not necessarily a bad thing, but as mentioned, it does increase your tax bill if the fund is selling stocks with lots of short-term gains. Additionally, as mentioned in the previous section on cost, turnovers cost you money. If turnover does hurt a fund's return, wouldn't there be a correlation between a fund's turnover rate and its after-tax return? Indeed there is!

As reported by Morningstar on August 15,1997, "The Low Turnover Advantage," the lower a fund's turnover, the higher it's returns, in general.

Over a 10-year period ending 6/30/97, Morningstar found that low turnover funds (under 20% turnover) beat high turnover funds (turnover over 100%) by an average of 1.58% annually. The exception was in small-cap funds, where high turnover funds did better.

The conclusion of the study: "Although our study admittedly covers a limited time period, it makes a strong case that for many domestic-stock categories, less-active managers are more successful. Investors are particularly unlikely to benefit from high-turnover strategies among large-cap value and blended funds and the rewards of turnover are also fairly small for most other categories."

Please note that this study only analyzed the affect that turnover has on performance. High turnover also increases the investor's tax impact.

Types of Mutual Funds Mutual funds are classified according to their structure and investment objectives:

• Open-end mutual funds: Mutual funds that issue as many shares as the public wishes to buy are called open-end mutual funds. When the public wants to sell, open-end funds redeem all shares tendered.

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• Closed-end mutual funds: Closed-end mutual funds are funds that have a fixed number of shares. Unlike shares in an open-end fund, where the fund itself sell and redeems all shares, the shares in a closed-end fund are traded on public exchanges.

• Investment objective: Mutual funds are also classified according to the investment objective of the fund. Examples of mutual fund investment goals include:

• Money market funds: These funds invest in a variety of short-term, money market debt, such as Treasury bills or commercial paper.

Possible Risks

The risks involved in owning shares in a mutual fund are the same as those involved in directly owning the underlying securities. However, these risks are generally spread by the fund manager over a range of securities, to help minimize the impact of any one risk on a fund's performance as a whole.

• Mutual funds holding stock investments

• Market Risk: The value of a stock can fluctuate up and down. • Mutual funds holding bonds or other debt instruments

• Market risk: The value of a bond will fluctuate, up and down, usually in response to changes in interest rates.

• Default risk: The possibility that the issuer of a bond or other debt will not pay either interest or principal.

• Inflation risk: As fixed-return investments, bonds are subject to inflation risk; over time, the dollars received may have less purchasing power.

Seek Professional Guidance- All investment decisions should be made only after consultation with a professional advisor and a

complete review of the appropriate prospectuses.

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CD’s vs. Annuities

CDs vs. Annuities: Where Should You Invest Your Money?

If you’re quickly approaching retirement, you’re probably asking yourself an all-too-common question: should I invest in a bank CD or an annuity? You’re not alone. Consumers across the nation are struggling with the same dilemma. The first step in making this important decision is to understand the differences between these two products.

Annuities and CDs (short for bank certificates of deposit) might appear to be very similar at first glance. Both are secure, low risk investments that are designed to help you accumulate wealth. However, these two types of investments are actually very different products.

First of all, CDs are generally issued by banks while annuities are offered by insurance companies. Secondly, a CD is typically a better investment for short-term goals, such as a down payment on a new home or car, while an annuity is a better choice for longer term goals, like generating a lifetime stream of retirement income.

Here are a few things to keep in mind as you weigh the differences between CDs and annuities:

CD Interest Rates are Uncertain

Interest rates have plummeted in recent months. While that’s a great thing for homebuyers, it translates into lower returns on bank savings. Right now, one-year CDs often pay 1.5 percent or less—a huge drop from a couple of years ago when CDs paid more than 3 percent.

The future is uncertain for CD interest rates. Your rate on a CD may be higher or lower a year from now—it’s too hard to predict. So, if you’re looking to maintain a certain retirement income level, a CD may not be the best bet.

Guaranteed Rates with Fixed Annuities   36

Fixed annuities offer a guaranteed minimum. This ensures that your investment will not drop below the minimum performance. When interest rates drop, so do returns on CDs. But fixed annuity returns never fall below a certain point. Therefore, if you hold a fixed annuity until maturity, you are guaranteed to earn a minimum stated rate of interest regardless of what happens to interest rates or stock market indexes. Because fixed annuities are lower risk, conservative investments, they are often ideal for retirees or soon-to-be retires.

Fixed Annuities offer Incredible Tax Advantages

With CDs, you must pay taxes annually on the interest earned even if you haven’t withdrawn any money. Alternatively, fixed annuity earnings are tax-deferred. You only pay taxes on interest earned when you withdraw money from the annuity. This means that you end up earning an increasing amount of money with fixed annuities because the deferred tax on your interest remains in the investment instead of being paid out to state and federal taxes each year.

CDs A Not as Flexible

Fixed annuities also offer more flexibility than CDs. With a CD, you cannot remove any money before the term is over without incurring an early withdrawal penalty. Although fixed annuities also have early withdrawal penalties known as surrender charges, they include provisions that typically allow you to withdraw 10% of your investment value each year without penalties. Additionally, with many fixed annuities, you can withdraw the earned interest on your investment each month.

Some fixed annuities offer you access to the sum total of your investment funds in the event of a financial hardship. For example, you may be allowed to withdraw from your fixed annuity penalty free if you are hospitalized, develop a life-threatening illness or are forced to live in a nursing home for an extended length of time.

With a fixed annuity, you can also choose an option to receive a predetermined amount of income from the investment over a fixed time period, such as five or ten years. This option offers enhanced income security while spreading out any taxes that your earnings might incur over many years.

Annuities are Extremely Safe

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While CDs are issued by banks, annuities are issued by insurance companies. As compared to banks and brokerage firms, insurance companies have a historical record of stability. This is largely because insurance companies offer conservative investment options that carry very little risk.

Teach Your CD to Roll Over

Because certificates of deposit (CDs) are one of the safest types of investments available, countless consumers are attracted to them. However, when it comes to investments, less risky typically means less reward. If you have lofty financial goals, you may want to consider rolling over your CD into a more potentially higher-earning investment vehicle when the time comes.

With a CD, you collect interest on your money much like a savings account. However, your earnings typically are greater with a CD because banks pay higher interest on these accounts. Why? Unlike a savings account, which you can close at any time, banks expect you to keep your money in the CD for a specified amount of time, and you pay a penalty if you withdraw funds early. This allows the bank more flexibility to use your money for other purposes, such as investments or loans for other customers.

Just think: Insurance companies have survived times of war, global depressions, government failures, industry scandals and disastrous stock market plunges. However, in even the worst of times, Americans have been able to safely insure their homes, health, life, cars and businesses.

Besides the fact that CDs are low-risk, consumers also are drawn to them because of their convenience and simplicity. It's extremely easy to open a CD. You simply tell your bank or credit union that you want to buy a CD, complete a few simple forms and disclosures and then move cash or funds from your checking or savings account into the CD.

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Once you start receiving interest on the CD, you can either spend or reinvest it. Most financial experts would encourage you to reinvest the interest you earn on a CD because this will allow your account to grow much more quickly.

When your CD reaches its "maturity," or the end of its term, most banks will give you seven to 10 days to decide what to do with the funds. You can either withdraw the money as cash or roll over the funds into a different investment. However, if you don't give your bank any guidance, it will automatically reinvest the funds into a new CD.

Because CDs are such safe investments, the interest they pay tends to be pretty low (depending on the current economic and interest rate environment). This puts CDs at a relatively high risk of losing purchasing power due to inflation over the long-term. Therefore, if you're saving for the long haul, you might want to roll over mature CD funds into a different savings vehicle.

Annuity Myths

Top 15 Myths about Annuities exposed.

1st Myth: “I can figure out how to take withdrawals from my retirement accounts to meet my income needs." published by the TIAA-CREF Institute

Reality: When you retire, you can try to develop a strategy for taking withdrawals from your various retirement accounts and assets, which might include defined contribution plans like 401(k)s or 403(b)s, IRAs, individual investments like stocks and bonds, and personal savings.

However, crafting an income strategy from investment and savings vehicles such as these by living off your interest and earnings, or by drawing down principal gradually, can be tricky; while you may be successful in meeting your income needs, there’s always a danger that you’ll either live longer than you thought they would.

Through an annuity, you can help avoid the danger of exhausting your retirement assets since the annuity provides you with regular payments for as long as you live. A Life Annuity can provide the highest level of income available to a retired individual.

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There are different ways you can choose to receive income from an annuity for yourself and, if applicable, your annuity partner. For example, if you only need income for yourself, you can select what’s known as a “single life annuity.”

If you also want to provide benefits to your annuity partner, the “full benefits to survivor option” provides full payments to both you and your partner until both of you die. Another option is the “two-thirds benefit to survivor” option through which, at either the death of you or your annuity partner, the annuity income drops to two-thirds of the amount it otherwise would be.

2nd Myth: "If I own an annuity and I die, the insurance company will keep all my money." Published by the TIAA-CREF Institute

Reality: This is a common misconception about annuities- and one that scares away many investors arrangements that provide annuitants with payments until death, and if an annuitant dies soon after thepayments begin, all payments from the annuity cease.

However, virtually all annuities offer an option called a guaranteed period that reduces the annuitant’s risk of receiving too few payments. With a guaranteed period, if both you and your annuity partner die within the guaranteed period, payments continue to your beneficiary (s) until the end of the period.

If you die after the guaranteed period ends, no further payments are made to the beneficiary(ies). Insurance companies offer guaranteed periods that cover varying lengths of time, such as 10, 15 and 20 years.

Selecting a guaranteed period is an effective way to remove the risk of losing all your money to the insurance company due to an early death. Note that while selecting a guaranteed period will reduce the amount of your payments, the overall cost may not necessarily reduce your payments by a large margin. Talk to your annuity agent for more information.

3rd Myth: “Annuities don’t give me the flexibility I need to create a retirement income strategy."published by the TIAA-CREF Institute

Reality: Actually, as we discussed, annuities can provide a wide range of flexible arrangements such as fixed and variable account options, a variety of ways to receive annuity income and guaranteed periods.

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Also, when funding your retirement, note that annuities don’t necessarily have to be an “all or nothing” choice.

In other words, depending on your financial goals, you can combine an annuity with lump-sum or systematic withdrawals, or other ways to receive your money, to create an income strategy that’s tailored to your needs. In fact, some studies show that combining an annuity with other income options can provide a better way to fund your retirement than selecting either an annuity or some other income option individually.

For example, some people in the early years of retirement may initially need less income (especially if they are working part-time or phasing into retirement), and more income later on as they get older. If you are in this situation, one strategy could be to use some of your retirement savings to purchase an annuity meet basic monthly expenses while keeping the rest of your money in a savings or investments from which you can take withdrawals to meet any additional financial needs. For retirees who have specialized income needs, another option is a fixed period annuity. In contrast to a life annuity a fixed period annuity makes regular payments over a specific number of years. When the fixed annuity period ends, the annuitant will have received all of his or her principal and earnings, and the annuity payments will stop.

A fixed period annuity may be a good option in cases where you have other sources of lifetime income and want to supplement your income for a specific period of time; you’d life regular income for a specific period of time until you begin receiving lifetime income from another source; or you or your annuity partner is in poor health an you want a regular income for a limited time period.

4th Myth: “ I heard that once I begin receiving income from an annuity, I can’t transfer money among the different investment accounts." published by the TIAA-CREF Institute

Reality: It’s true that once you annuitize, the decision to receive payments through an annuity is irrevocable - you cannot, for example, transfer the money out of the annuity and put it into another investment vehicle such as an IRA. However, provided your annuity offers a sufficiently broad range ofinvestment options, you can modify your investment strategy in response to market conditions or changes in your personal financial

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situation by reallocating your assets among the different investment accounts.

For example, as you grow older, you might decide you’d like a steadier income stream. You can take some of the annuity income you are receiving from more volatile investments such as stock (equity) accounts and transfer it to more conservative investment choices such as fixed-income accounts.

Conversely, if you’d like to increase your exposure to equities, you may want to transfer money from more conservative asset classes like fixed-income and money market to stock accounts. No matter what your retirement investment goals are, note that an income stream that’s well diversified among different asset classes such as stocks, bonds, real estate and guaranteed accounts may provide a more stable income (in inflation-adjusted dollars) than if you have most or all of your investments in a single asset class. (Of course, diversification cannot eliminate the risk of fluctuating prices and uncertain returns.)

5th Myth: “Annuities are bad deal for investors because they have high fees and hidden expenses.” Published by the TIAA-CREF Institute

Realty: While it’s true that some annuities may charge high fees and other expenses, there are a number of lower-cost annuties available in the market. Therefore, if you’re you’re interested in purchasing an annuity, shop carefully and look closely at the sales loads, mortality fees, surrender charges and other fees that a given annuity charges.

Also, take the time to understand the different features available through any annuities you investigate and the prices for these charges, investment options and performance track record (although an account’s past performance is no guarantee of future results). You can learn a great deal about an annuity and its features by reading the annuity’s prospectus or by visiting the website of the financial company that’s offering it.

6th Myth: Every annuity is a variable annuity. According to the Annuities Institute

Reality: the performance of a variable annuity is based on how the stock market performs. Fixed and immediate annuities are not based on stock market performance. They offer guarantees through fixed

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minimum interest rates, thereby offering protection against loss of principal and earnings.

7th Myth: Fixed annuities will never outperform inflation. According to the Annuities Institute

Reality: Fixed annuities guarantee a set interest rate over a specific period, which is often used to give long term investments more growth and return and tax advantages than bank certificates of deposits.

Some investment advisors do not recommend fixed annuities because of their perception of future inflation; they who feel that some risk must be taken to grow savings to maximize personal wealth. However, for investor who cannot afford to lose any of their life savings, risk should never be a substitute for long term planning and new income generation.

8th Myth: Indexed annuities are often sold inappropriately. According to the Annuities Institute

Realty: The indexed annuity was created as a hybrid accumulation vehicle, combining some of the growth potential of the stock market with the safety features of a fixed annuity. While potential upsides may be capped at 7 to 12 percent, investors do not have to worry about losing their life savings. Indexed annuities generally offer several options that guarantee minimum interest rates paid, regardless of performance.

9th Myth; Annuities are all about penalties, surrender charges and fat commissions. According to the Annuities Institute

Reality: Surrender charges are a much maligned advantage of fixed annuities-not a disadvantage. If you have to sell a stock, bond, mutual fund or other investment vehicle 1 year, 2 years or more down the road to meet an unexpected emergency, can you say for certain what that investment will be worth at the time?

The advantage of the fixed annuity, including IAs, is that the minimum value after surrender charges is clearly stated in the contract and in the disclosure statements. The value can only be higher, never lower, than what is expressly stated.

Like the 401(k) and the IRA, the annuity takes advantage of special legislation, which provides incentives for people to save more money for retirement. Annuity providers offer higher interest rates,

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guaranteed security, tax deferred accumulation and positive benefits for tax and distribution planning.

Regarding commissions, the annuity is not a high compensation product. It is structured differently from other accumulation vehicles and over time generates similar commissions to other comparable products. Actually, since the market embraced the IA in 2001, EIA commissions have been steadily declining, going from 10.7 percent of premium in 2001 to 7.7 percent in 2005.

10th Myth: Never invest IRA money in an annuity. According to the Annuities Institute

Reality: Consumers frequently hear the recommendation to disregard any advisor who recommends an annuity within an IRA. However, when safety is paramount and loss to principal is not an option, the annuity offers a higher rate of return than other investments. Many fixed and indexed annuities outperform other non-security investments while removing risk to principal and savings. The features of the product, not tax deferability, are why many clients choose the products for IRAs.

11Th Myth: Only deal with registered investment advisors. According to the Annuities Institute

Reality: Some of the criticism toward annuities comes from professional asset managers who earn their commissions as a percentage of the total money they manage and keep at risk for growth. Too often, seniors are talked into placing their money into vehicles that could instantly reduce their life savings.

There is a big difference between the professional investor who wants to aggressively grow a $1 million dollar portfolio and the retiree with $150,000 who likely needs every dollar to get through retirement without outliving savings. The latter may achieve their retirement goals just fine working with a licensed insurance agent or advisor who is not necessarily an RIA.

12th Myth: Insurance agents aren’t qualified to offer financial planning. According to the Annuities Institute

Reality: A securities license is only needed when selling speculative investments with the potential for loss. Many insurance providers focus on fixed and indexed annuities for retirement, in which loss to principal

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and earnings is not an option for their clients. They also undergo continual training and professional courses.

13th Myth: Commission-based planners must be biased. According to the Annuities Institute

Reality: Financial firms created fee-based planning to ease client fears of non-objectivity. Their goal was to maximize medium term earnings and residual income, while having more control over client investments.

Ironically, many within that field do not actively represent or sell fixed, indexed, or immediate annuities for retirement purposes, even in cases where there is no appropriate level of risk.

14th Myth: Only deal with big, familiar names. According to the Annuities Institute

Reality: Brand visibility doesn’t automatically mean the best rates, service and performance. Restrictive affiliations and objective advice do not normally go hand-in-hand.

15th Myth: Our Financial Designator is better Than Yours. According to the Annuities Institute

Reality: Many planners and consumers rightfully look to financial designators as an indicator of professional service, dedication, and commitment to excellence on behalf of clients. Some investmentgroups go as far though as stating that only two designators should be utilized for financial planning, and that the rest should be instantly dismissed.

Ironically many of the members within two of these bodies do not normally even carry insurance licenses, as they focus on risk based investments for aggressive growth purposes. They offer little support to risk-adverse seniors looking for maximum security and safety for their life savings. Regardless of their financial designator, always make sure that your financial advisor understands your risk tolerance and provides service and products suited to your individual investment requirements.

Secrets of Annuities

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What the insurance companies don’t want you to know and information they do want you to know.

Let’s examine annuities. Here is a definition of the two basic types of annuities: Immediate Annuity (income) and Tax Deferred Annuity.

Annuities can be fixed, variable and immediate. (a)

The difference between deferred and immediate annuities is just about what you'd think.

With an immediate annuity your income payments start immediately. You decide whether you want income guaranteed for a specific number of years or for your lifetime. The insurance company calculates the amount of each income payment based on your purchase amount and your life expectancy.

A tax deferred annuity has two parts: the accumulation where you let your money grow, and the payout. During accumulation, your money grows tax-deferred until you take it out, either as a lump sum or as a series of payments (see immediate annuity above) You decide when to take income from your annuity and therefore, when to pay the taxes.

The payout phase begins when you decide to take income from your annuity. As your needs dictate, you can take partial withdrawals, completely cash-out (surrender)(1) your annuity, or convert your deferred annuity into an immediate annuity.

Tax Deferral Insurance companies always tell us a great benefit of annuities is tax deferral. In simple terms this means that insurance companies will credit interest to your annuity and there would be no tax liability as long as the funds remain intact. Sounds like a great idea but what this really means is that the tax liability will always be there for you or your beneficiaries! You cannot escape the tax man!

What are the benefits of tax deferral?

The benefit is based on the concept that when the taxes are paid in the future the net out of pocket in real dollars will be reduced because the tax will be paid with inflated dollars. The actual tax liability could be lessened by the reduction in the net out of pocket cost because of inflation.

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Annuity Secret #1 Great Products or Great Rip Offs?

As an example, if we assume 3% inflation based on a 10 year example this could be your benefit of tax deferral.

If 100% of tax liability is due today that actual tax liability paid 10 years from now would only be 62% in future tax liability based on today’s dollars!

This is one way inflation could work for you.

Tax Free Exchanges and How Insurance Companies Make Money.

How do insurance companies make money? Just like banks and other lenders, insurance companies use our money to make money. They invest in vehicles that pay interest and the difference to what they pay us and what they earn, they keep. Their margin is used to pay expenses, set safety reserves and earn profits.

How do we keep the playing field more balanced for us and not the insurance company?

To our benefit we can change contracts and move our money from company to company or contract to contract. The IRS has allowed transfers without assumption of tax liability by using the 1035 exchange option.

Insurance companies love it when the money stays in place and they can pay what is known as “the old money rate!”

As consumers we want to earn as high a rate of return as possible so we always want the “new money rate!”

We achieve this by keeping our annuity funds in movement. In other words, having the option to move from contract to contract or company to company.

Old money rate means the insurance company earns more, new money rate means we earn more. Use the 1035 exchange to achieve the highest rate possible.

Tip and Benefit: New Money Rate

Other points to consider before you transfer your annuity.

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Annuity Secret #2 Insurance Companies Don’t Want You to Move Your Money

1. Contractual features and guarantees. Do you understand both the new contact and your current contract? (read the contract and make certain you fully understand the benefits and the restrictions)

2. What are the surrender expenses and how does that compare to your current contract. Is access to 100% of your funds at any time important? (surrender fees can be substantial, please consult your contract)

3. Compare the insurance company ratings. Are they similar? (ratings are important, seek third party information such as your state department of insurance)

4. Always ask if the receiving company will help cover the cost of any surrender penalties.

Taxation: Social Security and how taxation is calculated.

When social security came into existence under Franklin Roosevelt he promised that it would never be taxed. Today however social security can be taxed as high as 85%.

Annuities can help reduce this taxation because interest credited to an annuity contract is not taxed until used. If your earned interest is not immediately needed then an annuity may reduce your overall tax liability.

A simple comparison can be illustrated between a bank CD and an insurance company annuity. If both pay 5% the annuity interest would not be included as income as long as it remains in the annuity contract. Interest at a bank would be included as income even if the funds are just idle and not used.

Tip and Benefit: Annuities can reduce the overall taxation on your social security.

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Annuity Secret #3 Annuities can reduce taxation on Social Security

Annuity Secret #4 Insurance Companies don’t care if you Live or Die

Income: Annuities are the only product available that can provide an income for life. Here is a little secret, insurance companies do not care if you live or die!

They just don’t. If you live a long time then someone else didn’t. They base their income liabilities on the mortality table which the IRS uses to determine life expectancy. How do you protect yourself and your heirs in the event of a premature death?

If you decide to convert your annuity to a lifetime income consider placing an underlying guarantee rider on the payout. This would place a guarantee of a certain number of years that would be paid to your beneficiary in the event of a death. These guarantees can be almost any time period from 5 years to a 30 year guarantee. Many contracts have a number of options, so make certain you fully understand how these guarantees can benefit you.

Tip and Benefit: Guarantee your income with a guaranteed minimum payout.

If a beneficiary is named in an annuity the funds are paid immediately and without delay. But what if an annuity has no named beneficiary? The funds would generally need to be probated and could cause a delay in being paid. Plus probate can add additional expenses for your heirs.

The simple solution is to name a beneficiary or beneficiaries. But remember it is up to you to make that determination.

Tip and Benefit: Naming a beneficiary can avoid probate .

An Annuity That Rises with Stocks But Doesn’t Go Down? How Is That Possible?

How would you like an annuity that pays gains based on a stock market index return, yet helps protect your principal when the market declines?

Here’s the opportunity: Many insurance companies have introduced the

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Annuity Secret #5 Probate Reduction Cost is up to You!

Annuity Secret #6 Your Annuity can only go Up!

Fixed Indexed Annuity . These annuities have the following features.

1 Your return (amount credited ) each year is linked to an outside source such as a stock market index.

2 If the stock market index goes down, you do not lose any money; your original premium is protected.

It’s hard to beat an annuity that always goes up. This is an excellent alternative for funds in which a higher return is desired or needed. By placing your funds in a fixed indexed annuity, your annuity value can only increase.

This is an alternative for consumers who want to see their funds increase while at the same time defer the tax liability.

Your funds will never equal stock market returns and your returns will depend on your contract. There may be fees and some expenses that must be paid first so a good estimate is approximately 60% to 70% (7) of what the Index may return. Be informed and be sure these products are for you.

What is the real benefit of Fixed Indexed Annuities? Your funds are fully guaranteed and are safe and secure. Your Fixed Indexed Annuity can only increase. Fixed Indexed Annuities are best suited for people who want to protect their original principal and provide for an increase in funds linked to a major index.

Fixed Indexed Annuities vary by company and by state. Always completely understand your annuity and make certain it fits your situation. Make certain you understand the premature use charges associated with these products.

With a Fixed Indexed Annuity, your return is linked to the increase in one of several stock market indexes, such as the S&P 500. However, if the stock market goes down, you do not lose any of your money. Most Fixed Indexed Annuities have a guaranteed minimum rate of return which is typically 3%, even if the index you invested in goes down the entire time you are invested, you will still have the minimum guaranteed growth.

Tip and Benefit: Understand Your Contract!

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Annuity Secret #7 Your Annuity May Have a Death Penalty; You May be Penalized if You Die!

What is this all about? It may surprise you that some annuity contracts have a penalty when you die, which means that if you die before the end of your surrender period, the insurance company may charge your beneficiary the balance of the surrender charge rather than paying the full account value!

Make certain that you understand this portion of your contract. It is easy to find an annuity that does not charge this penalty so make certain that you fully understand all aspects of your contract. Be informed.

Tip and Benefit: Are all my funds available to my beneficiary if I die?

Almost all annuities have surrender fees. These fees are in place to guarantee the insurance company has the use of your funds for a longer or specific term. Is this bad? No, the flip side is with the insurance company holding your funds for a longer time period means that more benefits may be provided to you!

What is a surrender fee? It is a charge levied against an investor for the early withdrawal of funds from an insurance or annuity contract in excess of the free annual withdrawal privileges. Surrender fees act as an economic incentive for investors to maintain their contract. They allow the insurance company to have reasonable expectations for the frequency of early withdrawals.

So how do I access my funds? Most contracts allow for the removal of earned interest on a monthly basis. Also, most companies allow you to annually withdraw 10% annually of your annuity account value. Plus most contracts allow annuitization (pay outs) of your annuity contact without penalty and many contracts only require a 5 year minimum period. Also death ends most contacts as your beneficiary receives the final benefits of the annuity. Access is not really a problem and having surrender fees allows the insurance company to make long term commitments to you.

Tip and Benefit: Longer Surrender Fees May Mean More Contractual Benefits for You.

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Annuity Secret #8 Your Annuity has Surrender Fees

Annuity Secret #9 IRA Annuities

Did you know that your IRA can be converted to an income you can never outlive? (11) Did you know that the only way to access this option is through an insurance company? If your IRA is at a bank and earning interest all you can ever receive is the value of your IRA plus any interest earned. That same rule does not apply to insurance companies. You are allowed to convert your IRA to an income that will pay for as long as you live.

Don’t let your insurance company keep your money if you die prematurely! Put guarantee income riders in place.

This option is called the:

Pension Payout Option!

Ask your agent or your insurance agent for details about this wonderful benefit of your IRA.

Tip and Benefit: Use You IRA as Safe Secure Reoccurring Income

The insurance agent will help you decide if an annuity fits your portfolio. (13) They will review your current situation free of charge and answer any and all questions you might have about annuities and other investments.

Remember that annuities are not for everyone, but they do have numerous features that can provide many benefits to you.

So what are the real benefits of annuities? Here is a list.

• Tax deferral

• Lifetime Income

• Probate avoidance

• Safety and security

• Market upside with no downside risk

• And so many more benefits.

Advanced Annuity Planning

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Annuity Secret #10 Your Insurance Agent

Understanding the Difference between Annuity, Bond and CD Ladders

One great way of creating a gradually disbursing retirement benefit while still keeping the long-term savings portion of your money conservatively invested is to create a bond, annuity or CD ladder. These ladders are separate investment instruments with varying maturity dates that allow you to take advantage of long-term savings rates while still making sure that some of your money is readily liquid when you need it. This strategy is called "laddering" because each maturity date is its own rung on the ladder of your retirement years.

While each ladder is a great strategy in its own right, it's important to understand the differences between each of them before you decide which is (or are) right for your retirement plan.

Annuity Ladders

An annuity ladder is created when you spread out your annuity purchases over several years. Instead of investing all your retirement savings at once into a single annuity contract, you only invest some of the proceeds. The rest remains invested in equities, bonds, CDs and other appropriate investments. Then, over time, say every 5 years, you buy another annuity. Doing so helps insulate your savings from being locked in to low-interest annuities. This gives you the benefit of guaranteed income without interest rate risk.

Bond Ladders

Bonds are debt instruments that act as loans to companies and municipalities. While the issuer is using your principal for their projects they pay out interest to you. Once the bond matures, you are paid back the principal that you invested. When you create a bond ladder, you purchase several bonds with varying maturity dates. The later maturity dates afford the investor greater interest payments, but the earlier maturing bonds give the investor liquidity when they need it. Many bonds also have put options so that if you should pass away before the bonds in your ladder mature, your family can execute the put and be paid the principal by the bond issuer.

CD Ladders

CD rates vary depending on how long you are willing to have your principal tied up in the CD. A 20-year CD will have a significantly higher rate than a 6-month CD, but tying all your retirement money up

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for 20 years in order to get that rate is not a smart strategy since you are likely to need something to live on during the 20-year period.

With a CD ladder, you can invest a portion of your savings into CDs with varying maturities. They will mature and pay you your principal and interest throughout the years as you enjoy your retirement.

Fill Up Your Buckets for a Stream of Retirement Income

If you’ve heard it once, you’ve heard it a million times: when it comes to retirement planning, diversification is key. Everyone knows how important it is to build up a healthy nest egg—but if you put all your eggs in one basket, you are putting your financial well-being at risk.

Look at it this way: if you throw all of your funds in one investment or market sector, what happens if that sector takes a nosedive? Your retirement savings will go down the tubes right along with it. However, if you spread your investment funds across a variety of different assets, you will greatly decrease your risk.

So, how can you possibly protect yourself from financial devastation and still save up plenty of funds for a comfortable, happy retirement? Simple. It’s time to fill up your buckets!

The Art of Bucket Planning

As Americans are living increasingly longer lives, one of the greatest risks today’s retirees face is the possibility of outliving their income. That’s why financial experts recommend that retirees adopt what’s called “bucket planning.”

Bucket planning is the act of spreading money across various pools income to ensure you have a lifetime stream of income. This strategy is growing increasingly popular in the retirement planning field. As a matter of fact, approximately 52 percent of financial advisors recommend the bucket planning method to their clients, according to Gallant Distribution Consulting.

Collect your Buckets

There are a few different bucket planning methods. Some financial advisors recommend three buckets while others say you should fill up four. However, the most basic bucket planning strategy includes the following three pails:

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Bucket #1: This bucket holds into low-risk investments, such as short-term Treasury bonds. This pool provides a stream income for the first five to seven years of your retirement.

Bucket #2: This pail should be filled with indexed annuities, which offer guaranteed income with an upside potential if the markets do well. This bucket will provide income for years 8 through 15 of your retirement.

Bucket #3: This is the bucket for long-term investments that will provide a guaranteed stream of income in your later years.

Another version of bucket planning includes investing in three or four different fixed or fixed indexed annuities, each which has a unique set of terms and benefits.

In either strategy, each bucket represents a different stage in your retirement. The primary objective of your first two or three buckets is to create an annual income stream during your first 15 years of retirement.

When those 15 years are up, the last bucket still holds plenty of guaranteed annual income that will last throughout your lifetime. Because you have a bucket of income set up for each retirement phase, your cash flow will never run dry.

An Endless Stream of Income

Bucket planning has skyrocketed in popularity because it can create an endless stream of income that you won’t outlive. If you set up your buckets properly, you won’t lose money, you’ll always be accumulating money and you’ll always have a guaranteed stream of income. That means you’ll live a comfortable and financially stable retirement without having to worry about outliving your assets.

Safeguard Your Principal with a Split Annuity

To produce maximum income preservation benefits with annuities, a split annuity is a dependable option.  Utilizing two different annuities will provide you immediate income benefits while also having access to your original principal at the end of a defined period.

Immediate annuities provide regular monthly income for a set amount of time that you design to suit your needs.  Income taxes are greatly reduced since a percentage of the income generated from the immediate annuity is considered a return of your original investment.  

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Deferred annuities provide a guaranteed return of your original investment at the end of the defined period.  There is also the benefit of tax-deferred growth and an interest rate that is typically higher than most other conservative investment choices. 

The example below illustrates the power of the split annuity approach:

$100,000 Lump Sum Investment

10 Year Period Certain Immediate Annuity

Deferred Annuity @ 5.5%/yr

$41,457 $58,543Guaranteed Mo. Income $427.98

Bal at End of Yr. 1 $61,763Bal at End of Yr. 2 $65,160

81% Tax Free

Bal at End of Yr. 3 $68,744Bal at End of Yr. 4 $72,525Bal at End of Yr. 5 $76,513

Total Pre-Tax IncomeBal at End of Yr. 6 $80,722

$51,357.60Bal at End of Yr. 7 $85,161Bal at End of Yr. 8 $89,845Bal at End of Yr. 9 $94,787Bal at End of Yr. 10 $100,000

*Please note that this illustration is based on a guaranteed interest rate of 5.50% for 10 years with the deferred annuity. Interest rates will fluctuate and your actual rate could be higher or lower depending on when your money is deposited into the deferred annuity.  Please contact us for current interest rates.

Income for Life - Combining Immediate and Deferred Annuities

With the increasing lifespan of our country's population, the retirement years are stretching even further over the horizon than ever.  Statistics now indicate that large numbers of the retired will live to be 90-100

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years old, placing a greater burden on the present funding for retirement.

Couple this with the recent losses in the stock market over the last few years, and the growing trend among large companies to reduce pension benefits, retirees have begun to question whether they are adequately prepared for their retirement.  Many have begun looking around for ways to ensure they don't run out of money before they run out of time.

Some potential retirees are choosing to work longer in an attempt to build a bigger nest egg.  Others are reducing the amount of income necessary by downsizing their home or paying off debt earlier.  And in order to ensure a lifetime of income, many are turning to single premium immediate annuities in tandem with the more traditional deferred annuity to insure their security in retirement.

How does it work?  To begin with, the purchase of an immediate annuity offers the option of choosing a payout method.  This can be for life, restricted to a certain time period, or a joint and survivor method, which will continue to pay after the death of the first spouse.  The idea of a guaranteed income, no matter how long you should live, is a definite plus considering the uncertainty in other types of investments.

The purchase of a deferred annuity along with the immediate annuity provides the retiree a vehicle for long-term tax-deferred growth that would not be available from other investments such as savings accounts or CDs.  Because of the increasing lifespan of retirees, many are able to take advantage of the compounded growth the tax-deferral offers, increasing their return and providing additional income down the road should it become necessary.

The combination of these two plans offers the retiree a sense of security that would be hard to duplicate with any other type of investment.  The idea of a guaranteed income, coupled with long-term tax-deferred growth is the ideal scenario for most seniors. Coupled with the flexibility of structuring the annuity income to fit their needs, the combination of deferred and immediate annuities can provide a peace of mind that a major source of income will continue uninterrupted over the course of a lifetime.

Retirement, the Fixed Annuity and Old Man Inflation

One of the benefits of a fixed annuity is the certainty of a regular income for the life of the annuitant. While this guarantee is an

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extremely attractive component of a retirement income plan, special attention needs to be paid to the long-term effects of even a mild period of steady inflation.

With fixed payments, the annuitant will be faced with the prospect of a decline in the purchasing power of the income received from the annuity, a potentially devastating prospect should inflation remain at high levels for any length of time.

Retirement planning should begin early in life, but it's not unusual for many clients to only seriously think about retirement income as they approach the age of 65. With the increasing lifespan of the average senior, this means that they are looking at receiving income for a period of 20 years or longer.

That time period could well include a spell of inflation lasting several years. Consider that a fixed annuity purchased 20 years ago has seen it's purchasing power reduced by almost 50% today.

Annuity providers need to be aware of the need to discuss the potential impact of inflation on the purchasing power of the proceeds from the annuity and the various methods that can be used to offset these losses. With inflation having been held in check for the last few years, annuity holders have been shielded from these losses, but as the economy grows, the specter of rising inflation may once again come to the forefront.

Accounting for inflation can be accomplished by the purchase of an annuity that is linked to the CPI, or the use of an annuity with annual increases predetermined by contract. While these types of products may offer a lower initial income, the protection provided by the inflation hedge may well be worth the cost.

Another method may simply be the reinvestment of a portion of the payments into other fixed income products, taking advantage of the dollar cost averaging and increasing return of these investments as they rise to meet the current market rates.

Regardless of the method chosen to deal with the effects of inflation, its introduction to the discussion of future retirement income is an essential part of retirement planning and asset protection. Without the consideration of rising inflation, the client may be left in the position of a seriously diminished income level in the years to come.

Using Fixed Annuities to Fund Long-Term Care Expenses

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How do you plan to pay for long-term care for yourself or a loved one?  If the prospect of nursing home, home health care, assisted living, or similar custodial care is staring you in the face, you have several choices to pay the associated expenses.

You could "pay-as-you-go," keeping your assets in low-paying certificates of deposit, savings accounts, or money market accounts.  You could hope you need skilled care so Medicare will pay the bill-assuming you meet some very restrictive criteria, including 72 hours in the hospital first. 

You could bankrupt yourself in hopes Medicaid would pay your bills.  You could buy long-term care insurance to pay the bills if you're still insurable.  Or, you could take many of your cash equivalent assets (CDs, bonds, money markets, savings accounts) and other poorly performing assets (some stocks, etc.) and use them to buy an annuity.

Avoiding Probate

What Attorney’s Don’t Want You To Know

(And What They Do Want You to Know) in the American Culture, the word “Probate” is feared and avoided. Why?

First let’s look at a little history.

Probate was first originated in England during the 14th century. In 1857 the first court, The Probate Act of 1857, helped establish rules and procedures. This court had authority over wills and other documents left by a decedent. In those early years most wills were oral and the beneficiaries from the estate would testify to their right of inheriting the assets. If a disagreement arose, the court had the final say in the decision.

In America, early use of a probate court was first recorded in Philadelphia in 1805. During Benjamin Franklins’ era, he often spoke of the need for a system for the orderly transfer of assets from one generation to another. As American Juries Prudence developed over time, the foundation of the court system was an active and accurate probate court.

One of the more famous cases had to do with Charles Samuel Wilkinson who left his home in Maryland to his slave Clarence. Mr. Wilkinson had no living heirs and his choice of Clarence was looked as an outrage. Neighbors and other citizens complained and marched against Clarence owning any real property and finally the Supreme Court agreed and denied the transfer to him.

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The property was eventually claimed by the Presbyterian Church and Clarence was out as an owner. The minister of the church had been the driving force in the outrage and personally led the march in protest.

What is probate? How does it work?

Simply put, probate is the re-titling (change of ownership) of assets that require a paper transfer. These assets could include real estate, automobiles, bank accounts, invested assets, pension plans and other items.

When a person dies, the legal process begins to effect the direction of a will either left by the deceased or directed by the courts in the absence of a written will.

Probate is a process that identifies the deceased person’s assets and provides for the legal transfer to the intended beneficiaries. The process can identify debts, value property, and pay debts and taxes.

Probate involves the filing of paperwork, public notices and court appearances by lawyers. Attorneys are paid a fee from the estate to provide the legal services, and the amount of these fees is determined by the extent and often times the value of the estate.

The normal process would begin with the person named as the “personal representative” as directed by the will of the deceased. In the event of a person dying without a will, the representative will be appointed by the court. The personal representative normally hires the attorney to help direct them through the legal process. The court and the public are notified of the decedent’s passing and put on notice that the probate case is open. The will is validated and the list of assets is presented to the court along with any debts and unpaid taxes. Known creditors and beneficiaries of the estate are notified.

The representative must manage the assets during this process and make certain that the assets are secure. If instructed by the courts, the representative may be required to sell or make a change in an asset. This instruction may be from details listed in the will and may need to be done to comply with any specific bequests such as a cash gift or disbursement.

In most cases probate can last for a period of 9 months to a number of years depending on the complexity of the estate. Once the court has determined the estate is ready to close, the probate judge provides the documents to legally transfer inherited assets to the correct ownership and the estate is transferred. The court then will close probate and the estate will be finished. The personal representative will file the final tax return for the decedent and the probate process will come to an end.

Probate: Should it be avoided?

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Most people have a general fear of probate which is often based on publicity or misunderstood information. The press and numerous articles explain the hazard of probate and the underlying expenses which could wipe out an estate. Are these real or imagined concerns? The answer is quite simple, it all depends. It depends on the size and complexity of the estate. It depends on instructions from the will of the decedent. It depends on the state of residence of the decedent. It depends on where the assets are located. It all depends, etc., etc., etc.

If you have experienced firsthand the complexities of probate you will have an opinion that makes the point that probate should be avoided. A few points of concern about probate can be summarized:

• Probate can be an unnecessary waste of time. The time it takes to go through the process can be affected by court schedules and the notification process. Many times a beneficiary of the estate will receive no access to the assets until the process is completed.

• Probate is a public issue. Anyone can access public records, which

means your personal situation is open to anyone who wants to look. This puts your financial and personal life under public scrutiny.

• Probate can be an unnecessary waste of money. Due to the complexity of the process for most people there is no choice but to put the handling of the estate into an attorney’s hands. The legal fees come off the top of the estate and can be more than expected. Often times the cost to probate an estate can be 5-10% of the total value of the estate. Like all complicated issues, it all depends on the circumstances.

• Attorneys love probate. It is a cash generator for them because

there is no worry about payment; it comes from the estate. Also, attorneys who specialize in probate have the process down to a system that can be mostly automated. Forms are pre-set and easy to designate to an assistant or office staff.

• States require court hearings: Because of the nature of a decedent’s last will and testament, all states require an open court appearance. These appearances can delay probate due to schedules and disclosures.

Joint Ownership: Does it make sense for you?

Joint ownership of assets is a way for two or more people to own shares in an asset. The asset generally is real estate but can be other property

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such as a brokerage account, insurance company products or any other valuable property. The concept of joint tenancy is the transfer of the asset to the survivor or survivors. When one person dies, the asset immediately becomes the ownership of the surviving owner or owners. These assets will be transferred without the need of a will or any probate action.

Many different forms of joint ownership are available but the most common use is “joint ownership with right of survivorship.” This could be effective for spouses or could also be used for transfer between a parent and a child or children.

Property owned in joint tenancy automatically passes without any need for probate to the surviving owner or owners when death occurs to one of the owners. There is no cost to set up joint tenancy other than forms or a small legal expense if an attorney is used. Also joint tenancy is considered a private issue and the transfer is made without public notice.

Numerous pros and cons of joint tenancy decisions exist. Adding a child to a real estate asset may change the step up in tax basis for the portion of the value of the asset. This may have a future tax issue for the survivor. Also, adding another person to the ownership of an asset is a gift and once given it cannot be taken back. The value of the gift could also be in violation of gifting laws and it is important to understand your gifting options. Understanding the gifting options will offer you more choices in planning.

Wills and Trusts: Types and Descriptions

Many varieties of trusts exist and it is important to understand how each may affect your desired goals.

The Basic Will: This document is simple and basic. It generally provides everything be transferred from one spouse to another in the event of death. This is often referred to as a “sweetheart will”.

The Pour Over Will : This will is used in conjunction with a “living trust.” This allows for any specific asset not mentioned in the will to “pour over” into the trust and to be distributed as the trust dictates.

The will and contingent Trust: A common approach is for spouses to leave assets to one another and in the event of no surviving spouse, the trust steps up and gains control of the assets. This approach may benefit the situation where minor children are the survivors.

A-B, Credit Shelter Trust Will: This will allows for the creation of a trust to eliminate taxation on the first death of a married couple. The

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assets are placed in a credit shelter trust and are still available for the use of the surviving spouse. The beneficiaries of the trust are generally the heirs of the marriage.

Testamentary Trust : This trust is established at the death of the person who created the will. This type of trust can be used to care for minor children or to establish a gifting scenario. The trust does not begin until the will is enacted.

QTIP Trust : This type of trust (qualified terminable interest property) is used primarily in a second marriage situation. It is used to create income for a period of time (lifetime) and then is dissolved to the beneficiaries of the trust at death.

ILIT Trust: An irrevocable life insurance trust is used as a receptacle for creating a life insurance policy and proceeds. Normally the ILIT trust is outside of the estate of the grantor and thus not includable in the calculation of overall estate tax liability. At death, the funds from the insurance policy are paid to the trust and then distributed to the beneficiaries of the trust tax free.

Living Trust: These vehicles allow for the advance planning of asset transfer for anything requiring a new deed or title. Assets held in the trust are pre-signed and held until the death of an originator of the trust. At that time, the deeds and titles are simply recorded. A living trust will normally avoid any need for probate.

Avoid Probate Using These Easy options.

If you own a brokerage account or directly own stock certificates consider using the “transfer on death” option to avoid probate. This option is also known as the “Uniform transfer on death securities resignation.”

This option allows you to name a beneficiary who will inherit bonds, brokerage accounts or individual stocks without the need for probate. Much like the method used by banks, this option is a form supplied by the holder of the securities or individual stocks and once signed will only become affective at your death. You are not signing over any rights to your assets and they still are under your 100% ownership. All you are doing with this form is allowing the assets to be reissued at your death to the named beneficiary.

To claim these assets, all that is required is proof of death of the decedent and proof of identity of the beneficiary.

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The same type of beneficiary arrangement can be made on automobiles, boats and motor homes in some states. These states allow for a transfer on death registration form to re-title a vehicle at the death of the original owner. The same rules apply; you still own the car and have not signed away any rights until death. The beneficiary will show proof of death and proof of identity and the title is transferred. Many states are now considering this with California, Ohio and Kansas already in place. The forms are usually available at the county tax auditor’s office.

Avoid Probate with bank and retirement accounts

If you own bank accounts and want to reduce your exposure to probate with these assets the “payable on death” option may help you.

This option offers an easy method to keep bank account out of probate court. All that is required is a form which most banks can supply naming whomever you want to inherit the money in your account at your death. The process is simple, at your death the beneficiary simple goes to the bank with proof of your death and claims the funds in the account.

Nothing happens while you are alive and you have not signed away any rights. You are not giving anyone access to your funds while you are alive. The payable at death (POD) only allows access at your death. The probate court has no jurisdiction or say in how this account is transferred.

In the event of joint ownership between spouses, the POD will not become effective until the death of the last remaining spouse. This simple and easy to use step in avoiding probate requires no fee or charge, simply a form to sign.

If you own an IRA, 401k, or other type of retirement account, you will be asked to name a beneficiary. If a named beneficiary inherits the account at your death, it also avoids probate and is transferred immediately and without delay. Naming a beneficiary through a will may cause the need for a probate decision and can cause delay.

Single people are allowed to name anyone they desire but married couples could be required to name their spouse as beneficiary. If planning for heirs is to transfer funds to a child or other beneficiary other than the spouse, permission may be needed to make that designation. Community property states may also have requirements for the surviving spouse that may not wish to be designated as a beneficiary.

Are Revocable Living Trusts for You?

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A revocable living trust is a legal device that can help protect assets. Revocable living trusts are promoted as an alternative to probate. They can be used to manage your property during your lifetime and to distribute your property quickly after your death. Any competent adult can establish a revocable living trust.

• How is the Trust established?

A revocable living trust is established by a written agreement or declaration of trust which appoints a “trustee” to administer the property legally transferred to the trust. It gives detailed instructions on how property is to be managed and distributed upon death.

• What Assets Can Be Included in the Trust?

Assets can include property, deeds, stock, bank accounts, life insurance and certain pension accounts. Assets not formally transferred to the trust might still be subject to probate.

• How About Trustees?

With a revocable living trust, more than one trustee can be appointed. Each trustee can be delegated different duties.

• What are the Advantages of a Revocable Living Trust?

There are many advantages of a revocable living trust. Avoiding probate is one of the most significant and valuable features of a revocable living trust.

• What are the Negatives of a Revocable Living Trust?

A revocable living trust does have some drawbacks. Revocable living trusts can be expensive and do not eliminate the need for attorneys and accountants. They are usually longer and sometimes more complicated to draft than a will. The exact cost of a revocable living trust depends on how complicated your assets and your estate planning goals are. It is a smart idea to compare estimates of how much a revocable living trust will cost to draft, how much writing a will would cost, and how much probating your estate would cost.

You should also consider any fees you might want to pay the trustee.

Revocable living trusts also can require attention and management for an indefinite period of time.

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There is also an element of inconvenience to a revocable living trust. Once the trust is established, trust books must be maintained to ensure that all assets continue to be registered to the trustee.

There can also be unforeseen problems. A revocable living trust can raise a variety of new problems regarding title insurance coverage, real estate in other countries, Subchapter S stock, certain pension distributions, and other issues.

A revocable living trust is not a good idea just to save taxes. By itself, a revocable living trust does not avoid income, estate, or gift taxes. Provisions for saving estate and gift taxes can be included in both a revocable living trust or in a will. Even if your assets are held in a trust, a state estate tax return must be filed after you die if your property exceeds $1,000,000 in value for the year 2006 and beyond, and a federal estate tax return must be filed after you die if your property exceeds $2,000,000 in value for the year 2006 and 2007.

Given this information, you must decide if a revocable living trust is right for you.

Questions Regarding Probate

• Who is in Charge of the Probate Process?

The will names a personal representative who is responsible for overseeing the probate of an estate. A personal representative or executor may be a family member, friend, business associate, financial institution, or trust company. If the will designates no personal representative, the court appoints one. The representative's primary duties are to identify and collect the decedent's assets and manage those assets during the probate process. They pay debts, taxes, and probate expenses. Once probate is completed, the representative helps in the distribution of the remaining assets to the beneficiaries named in the will.

• Do I need to hire an attorney to go through probate?

The representative may wish to hire an attorney for legal advice related to the probate process. The personal representative is free to hire any attorney he or she chooses. For formal probate proceedings, a lawyer must represent the estate's personal representative. It can be advisable for the attorney to attend administration hearings and the attorney’s fees are paid from the estate of the decedent.

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• What's does formal and informal administration mean?

A probate judge presides in formal administration and in an informal administration the duties are handled by a county register. A formal administration is used if any contested issues arise, because only a judge can rule on these disputes. Informal administration can be less costly than formal administration. Not all states offer informal and formal options for settling probate issues.

• How much does probate cost? How do I control costs and expenses?

The major probate expenses include court costs and fees paid to the personal representative and the attorney. These funds come from the estate of the decedent. The value of the estate's assets can determine the court filing fees. Attorney fees can vary based on the difficulty of the decedent’s estate. Many attorneys will “specialize” in probate and often times a negotiated fee in advance can be arranged. Always make certain the fee estimate and fee structure is fully disclosed and understood before hiring an attorney. Most states do not allow an attorney to charge fees based on the overall evaluation of the decedent’s estate. Also, most states allow for the representative to be reimbursed for expenses pertaining to their duties.

• How long does probate take?

Depending on the state and the size or difficulty of the assets, probate can take 1-2 years. Some large estates can take longer depending on circumstances of the assets. Time must be made available for creditors and other claims to be filed against the estate. Also the final tax return must be filed with the IRS within nine months of the decedent’s death. Some states require probate to be closed within a fixed period of time but it can vary from state to state.

Retirement Planning

Study Reveals Boomers in Quandary about How to Save More for Retirement

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The Guardian Life Insurance Company's most recent study entitled Leading-Edge Boomers: Rethinking Retirement & Exploring Annuities has revealed that with only 6 to 15 years to go before retirement, 50 percent of leading edge boomers ages 50 to 59 who are not retired don't know how much they need to save for retirement.

An even more startling statistic is that 60 percent of all leading-edge boomers said that they intend to save more than they do, but don't always get around to it. The survey included 1,019 U.S. Baby Boomers between the ages of 50 and 59. It was designed to understand their attitudes toward specific retirement/investment products and what motivates them to save and invest.

The study exemplified the fact that leading-edge boomers are being hit with many realities that are new to their generation. Not only are they living and working longer, but they are also more involved with caring for parents and children. Leading-edge boomers are finding it difficult to focus on their finances to figure out how much money they'll need for retirement.

Among those leading-edge boomers who are not retired, 69 percent are concerned about outliving their financial resources. Eighty percent are worried about having enough income during retirement and 15 percent of all leading-edge boomers say they don't have enough money to save or invest right now.

Many leading-edge boomers have no clue how to grow their retirement assets. Guardian found that 48 percent of boomers surveyed are unsure of the best choices for retirement savings and 41 percent felt that their retirement savings and investments are not properly diversified.

Many boomers still have negative feelings about the market downturn at the beginning of the century. Fifty-seven percent of leading-edge boomers are concerned that stock market volatility will continue to have a detrimental impact on their retirement income.

The study found that 86 percent of leading-edge boomers don't own annuities; 70 percent of those without an annuity say they have not considered buying an annuity, mostly because they don't know enough about them.

When asked what they thought about certain annuity product features, many boomers surveyed liked the "concept" of annuities. According to the study, 71 percent find the idea of a retirement vehicle that provides

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a steady stream of income once they retire to be very appealing. Sixty-nine percent find a vehicle that guarantees principal very appealing. The study also revealed that women boomers are more likely to view annuities as providing an income stream during retirement. However, even though men like the income that annuities provide, they are more likely to view annuities as a vehicle to provide for their dependents.

Among those that have annuities, both men and women like the guarantees that annuities offer, but when asked to rate the value of annuity characteristics women rated both "steady stream of income" and "guarantees the principal" higher than men. On the other hand, men rated "death benefit" and "estate for heirs" slightly higher than women.

15 Things to Consider Before Retiring

Making the leap into retirement is truly a life changing decision. Before stepping out of the workforce for good, individuals must be sure that they have saved enough money to last throughout their retirement years and must understand how to manage their savings to beat Uncle Sam and inflation. Here's a short list of things to consider before choosing to retire.

- Set a Retirement Budget

Retirement should reduce some expenses, but others will remain constant, like cable and utility bills. When setting a budget, it is important to factor in leisure and vacation expenses, since it is retirement, after all. Staying within this budget is vital to extending your savings.

-Identify Your Incomes

After retirement, income will continue to flow in through Social Security, 401(k) plans, pensions, and other sources. The sum of these incomes must exceed the amount of your monthly bills, lest you have to seek part-time employment.

- Crack Your Nest Egg

When Social Security and pension checks just cannot cover certain expenses, that's when retirees turn to their savings to bridge the gap. Financial experts say that baby boomers should plan to live to be 90 to 100 years old, so a healthy nest egg would be quite necessary.

-Draw Up a Withdrawal Plan70

As for nest eggs, financial experts have determined that retirees can safely spend about 4% each year. Traditional IRA accounts are a bit trickier. Withdrawals must begin before reaching 70 ½ years old, and to avoid severe tax penalties, withdrawals from IRAs and 401(k) accounts must be large enough to meet IRS requirements.

-Be Tax Conscious

Withdrawal habits and the maturity of bonds can result in being placed in higher or lower tax brackets from year to year. Since your money is taxed when it is withdrawn or converted to a Roth IRA, make bigger withdrawals when you're in a lower tax bracket, and try to only withdrawal the minimum when in higher brackets.

-Maximize Social Security

The age at which an individual begins to claim Social Security directly affects the size of their payments. Those who claim at 62 will receive smaller payments when compared to someone who begins claiming at 70, but they will receive checks for a longer period of time. Knowing when to sign up is a careful calculation.

-Get Medical Benefits

Immediately enroll in Medicare once you've turned 65 to avoid any unnecessary premium increases. Private health insurance may need to be purchased if retiring before 65, unless coverage is provided by the former employer. Retirees must also choose the Medicare Part D prescription plan that is both affordable and covers all necessary medications.

-Plan for Long-Term Care

It is a possibility for any retiree that they may need long-term care at some point. Medicare benefits cover up to 100 days in a nursing home, but in the case of a devastating injury or unfortunate illness, this may not be enough. For this reason, you should consider a private long-term care insurance policy.

-Stay Active

Being active helps the mind stay sharp and the body stay healthy. Think about what new activities and hobbies will replace the time you used to spend at work.

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-Stay Connected

Many people's social lives are directly connected through work, and unfortunately most of these relationships dwindle after retirement. To maintain an active social life, consider joining a community group or begin volunteering before retirement, to build new friendships to carry you through your golden years.

-Coordinate With Your Mate

Before retirement, married couples are used to having certain roles and responsibilities, but when neither partner is working, changes at home are to be expected. Being open about marital expectations and responsibilities after retirement is important in keeping the relationship strong, allowing couples to enjoy the pleasures of retirement while still getting all of the chores done.

-Seek Affordable Accommodations

One of the benefits of retirement is the freedom to relocate to anywhere that sounds appealing. Moving to a smaller house or condo unit can reduce cleaning and yard work, as well as living costs.

-Save for Rainy Days

Smart retirees keep a separate FDIC-insured savings account for emergencies and unexpected expenses. Financial planners suggest putting away at least a year's worth of funds to cover anything from car repairs to weather damage to the home.

-Live Debt-Free

In your last working years, make a big push to pay off all debts, like car payments and mortgages. This allows you to use your retirement savings for other important things, like a Caribbean cruise.

-Practice Makes Perfect

Some employers will grant leaves of absence or extended vacations to workers considering retirement. This is a good option for those unsure about dealing with the abundant amount of free time that comes along with retirement. A practice run will give you a good idea if you're ready to retire or want to put in a few more years.

Retirement To-Do List

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A research study conducted by Fidelity, Putnam and the Employee Benefit Research Institute revealed that most workers, even those rapidly approaching retirement, haven't prepared a retirement budget or created a plan to ensure they'll have enough income. Having this kind of “take-it-as-it-comes” attitude can lead to many unpleasant surprises down the road.

It’s a better idea to plan now for what could lie ahead. Here's a checklist to get you started:

10 Years Prior

Consider moving to a cheaper community so that your retirement assets last longer. Your geographic location has a significant impact on your expenses.

Think about how you will spend your time. Your activities also influence how much money you'll need.

If you're not already contributing the maximum to your 401(k), IRA, and other retirement savings vehicles, now is the time to up the ante. Your chances of living to a very old age are better than ever, that’s why many financial planners now use age 95 as their default life expectancy.

Think about paying down your mortgage before you retire. Not having a mortgage means drawing less from your retirement accounts, letting them to continue to grow tax-deferred, and reducing your overall taxes.

Five Years Prior

Decrease your portfolio risk by lessening the amount of company stock and stock options in your portfolio. Talk with a CPA about the tax implications of such a move.

Contact Social Security for an estimate of your monthly benefits. Gather info for any pension benefits you have accrued and how much

you can expect to receive. Estimate available investment income based on the future value of

your assets. Think about healthcare and long-term care expenses. Medicare isn’t

an option until you reach age 65. You may also need a Medicare supplement to cover what Medicare doesn’t. Also keep in mind that even if your employer offers retiree health coverage now, it may not in the future or it could become unaffordable, so have a backup plan in place.

Start putting together a budget based on your anticipated income and expenses.

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Two Years Prior

Refine your budget and your asset allocation. If retirement doesn’t seem financially possible, consider working a little longer.

Reconcile your Social Security estimates to make sure your wages have been reported properly over the years.

Take a few extended visits to the area where you plan to retire. Be sure you visit during different seasons to see if you’ll like living there.

One Year Prior

Decide whether you will leave your 401(k) and other retirement accounts where they are, or roll them over into an IRA.

Update your budget and review your asset allocation.

Three Months Prior

Make arrangements for your rollover to be sure the money is available when needed.

If you're moving, perform any necessary repairs to get the house ready to be sold, and start packing.

You must apply for Social Security three months before you want to start receiving benefits. Medicare requires you to enroll three months prior to your 65th birthday. If you're already receiving Social Security, you will be enrolled automatically. Otherwise, you should enroll online or by phone with the Social Security Administration.

Choosing the Right Age to Retire Is Part of Your Retirement Strategy

Most people dream of an early retirement where they will be young and healthy enough to enjoy all of the activities they’ve planned. However, you should carefully consider at what age you retire, because it has some very real effects on the quality of your retirement.

People often make bad decisions when choosing their retirement age by failing to consider a number of financial factors that will impact upon their retirement:

How much money have I saved for retirement?  Will this be sufficient to pay my bills?

Will I keep my home? If so, will my mortgage be paid off?

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Do I plan to move to another community? If so, what's the cost of living there?

How much should I budget for medical expenses and/or insurance?

Such individuals also underestimate their life expectancies, and the negative impact inflation will have on their nest egg. What happens in these instances is that the person retires far too early for the amount of money they’ve saved, they spend their savings too fast, and they run out of money for the remainder of their retirement.

To avoid being caught in this scenario, use the following guidelines to plan your retirement date:

Estimate your life expectancy – The best way to do this is to examine your family’s history of longevity, and your personal health and lifestyle. Then make an educated guess about your own longevity.

Determine how much money you will need – If your health remains good, your retirement will probably last for 30 years or more. If you plan to live conservatively, financial experts say you’ll need about 70 percent of your pre-retirement income to live comfortably. However, if you expect to travel, or enjoy entertainments/expensive hobbies, you may need more.

Factor in how retirement age affects Social Security – If you draw Social Security benefits at 62, you will only receive 80 percent of what you would if you waited until your "normal" retirement age of 67. If you wait until age 70, your monthly benefits will be even higher.

Consider the risk inflation poses to your current savings – Most retirement calculators assume an annual inflation rate of about 3 percent. However, since 1960, the average inflation rate has been about 4.3 percent, with some periods being even higher. For example, from 1970 through 1980, the average annual inflation rate was 8.2 percent.

As the price for food, energy and health care continue to increase; retirees should plan on higher inflation in the future. Higher inflation rates impact everyone, but they are especially devastating for retirees. That’s because they spend a large share of their income on items like food, energy and health care that tend to rise faster than overall inflation.

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I would like to thank:

My friends at Annuity.com. They have been helping insurance agents and brokers with their clients for many years.

Bob Williams. This man is a true master of his craft. He coined the phrase “Zero is my Hero.”

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Biography

Robert is President of MontRidge Insurance Services and holds over a decade of experience as a multi-line agent in multiple states. His history and expertise in the financial field add to his credibility and trust when it comes to coaching his clients.

Robert has the unique blend of in-depth knowledge in the Life, Annuity and Mortgage industries, and educates the public about the benefits and features of annuities and life insurance through informative workshops.

He has authored and published over 400 articles about Annuities, Life Insurance, Wealth Building, and Asset Protection, and currently serves on the membership council of the National Association of Insurance and Financial Advisors.

Robert's clients value his insight into recognizing optimal solutions to their healthcare and financial needs in this evolving financial market. Staying current with changes in the industry, coupled with his experience and insight into excellent customer service, his philosophy is never selling a product unless it brings an added benefit and true value to you and your family.

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Robert C. Eldridge

Robert’s company, MontRidge Insurance Services, is dedicated to everything annuities and their benefits and features. There is not a “one size fits all” approach to most things in life. MontRidge Insurance Services can zero-in on what is important for YOUR needs and find solutions to meet those needs and expectations.

Using a proven timeline of consulting, formulating, analyzing and instituting a plan based on specific goals and objectives, MontRidge Insurance Services continues an ongoing review of your plan and makes changes accordingly.

This successful approach ensures that the client is never forgotten, is always educated, and their financial future is protected in good hands. Robert and the MontRidge Insurance Services team bring years of experience and education to the table.

They believe that an educated client will make the correct decisions when planning their financial future.

Specialties· Annuities: Fixed, Indexed, Immediate· Life Insurance· Income Generation· Guaranteed Principal Investing· Annuity Help & Information· Retirement Planning· Wealth Building· Financial Educating· Asset Protection

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Company Bio

· 401K & IRA Coaching· Mortgage Protection

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