Saving Plans

With the recent volatility of the stock market more people have been looking to investments that have less risk associated with them. I’ve found myself drawn to looking into prudent investment options for retirement. Recently I was reading a Forbes article that focused on saving for retirement by investing in an annuity. 

While reading the article I realized my understanding of annuities was almost nonexistent. The article definitely helped explain annuities in a limited capacity, but I knew that I had to do my own research to figure out what annuities are and if that made sense for me. Here are some of my findings: 

One big pro is having a guaranteed income after retirement. The average person works for the majority of their life and becomes used to getting a bi-weekly paycheck. When you retire it’s nice to know that you’ve set aside money that be in effect become your new income. 

A con to this with an annuity is that most annuities aren’t going to make up for inflation. Recently we’ve all experienced an inflation of about 7% across the board. You might have noticed that your groceries were more expensive than you expected or that your local restaurant has risen their prices. Which prices rising even if you put away a good chunk of money in your annuity, the payout might not go as far as you planned for. Because annuities are used so far in the future inflation can be a huge risk for this type of investment. 

In the Forbes article I read they gave a simplified projection of what to expect from Dave Hanzlik, “The following information applies to a 65-year-old electing a cash refund death benefit (premium less the sum of all payments made) and is an average for males and females. It provides both the total cost of the annuity and its monthly payout”: 

$100,000: $440 monthly 

$400,000: $1,760 monthly 

$1,000,000: $4,400 monthly” 

$440 monthly isn’t much money. But with a house paid off it would probably cover utilities and some groceries so most living expenses. If you lived up to 85 years you would have gotten an additional $5,600 from your original $100,000 investment. That’s a 5% return which isn’t that bad for a safe investment. Granted that doesn’t factor in the effects of inflation.  

In closing I would suggest that you do your own research on annuities and various annuity plans. There are even different types of annuities, indexed annuities and fixed annuities. Both of these have their own pros and cons and make sense for different people. With the way the economy has been for the last few decades it’s hard to predict what will happen. Prudently putting away money for retirement is important. When it comes to an investment that is vital, you must be diligent and investigate every option. This way you can have peace of mind that you made the correct decision for you and your family. 

The Washington Post is running a new series and I think it is going to be amazingly helpful to their readers. The newspaper is asking people to provide information about their financial situation and then letting experts in retirement savings plans comment and make suggestions. I think it will be very helpful to the people who choose to participate and passive readers alike. If you are interested follow this link and you can participate.

I think this series fits in very nicely with our philosophy here at LTC Tree. It is providing people with the information they need to make the right decisions. There is no pressure and no sales person twisting your arm. We just look at your situation and send you the plans that fit your circumstances.

The biggest benefit of this series is that it may get people thinking about their retirement and having the tough, honest conversations they need to have to make these plans. Retirement savings plans are important, and everyone needs to look at how they are going to build up the nest egg that they need to live comfortably in retirement. But how do you protect that nest egg from the unpredictability of life.

We do not know if we are ever going to need Long Term Care insurance. It is a fact that all insurance types share, you may pay into them and never need them. However, more and more, people are finding that Long Term Care insurance is a key ingredient in a prudent retirement plan. As we age the likelihood that we will need assisted living services increases. These services can cost hundreds of dollars a day. Extended hospital visits can also be a drain on bank accounts and other financial assets.

Many people believe that they are already covered by Life insurance riders or Chronic Care insurance. These plans are not always as extensive as they appear and may only cover certain illnesses. The riders feel like a savings because you pay for them with other insurance, but you may find yourself dealing with a funding shortfall. The bottom line is; there is no long term care insurance, but Long Term Care insurance.

I will be following this series as it unfolds, I love the idea behind it, and I hope that you will be following the stories as well. It could be just the information you need to put together your retirement plan. And, once you have that plan in place contact LTC Tree and we can help you protect that plan.