Consider options to reposition savings as retirement approaches.
How confident are you that your retirement portfolio will give you the financial security you need?
Those planning for retirement face more economic challenges than ever before. Market volatility, rising healthcare costs, concerns about the future viability of Social Security and the potential to be taxed on Social Security benefits leave many doubting their financial well-being. Many could be dealing with a very real possibility of outliving their assets.
Take, for example, a couple nearing retirement. Both participate in their respective employers’ 401(k) programs and have non-qualified retirement savings in bank CDs and municipal bonds. Due to increasing stock market unpredictability, they have been shifting more of their assets into conservative investments and savings vehicles each year. Though this strategy reduces their risk of losing money, low interest rates have them worried they may not have enough saved to retire when they originally planned.
Adding STYLE to their portfolio using a fixed deferred annuity is an alternative savings strategy worth considering.
S Safety – The premium is protected from market fluctuations and is backed by the full faith and credit of the issuing company.
T Tax deferral – Interest grows tax-deferred, meaning no taxes are paid until money is withdrawn. Clients may benefit from “triple compounding” in which the principal earns interest, the interest earns interest and the money that would otherwise have been spent on taxes earns interest.
Y Yield – Purchase payments are guaranteed to earn a set rate of return for a specified period as well as a guaranteed minimum rate of return for the life of the contract.
L Liquidity – Clients have access to their funds and may be able to avoid early withdrawal fees in certain situations outlined in their policy. Additionally, clients have the option to annuitize the contract at maturity, providing the ability to ensure lifetime guaranteed income.
E Estate planning – In most cases, annuity death benefits are paid directly to beneficiaries, avoiding the cost and delay of the probate process.
In repositioning a portion of their retirement savings, it’s possible for the couple in our example to take additional steps toward financial security. They can proactively address concerns about having enough money saved to live comfortably during retirement and help ease concerns about outliving their retirement savings.
While annuities are typically sold by a life insurance company, annuities are not life insurance and do not provide life insurance protection. They are not savings accounts or savings certificates and should not be bought to reach short-term goals.
Tax-deferred accumulation isn’t the same as tax-free. Annuities receive special tax treatment under the current federal law. You pay no tax on the interest your money earns while the money remains in the annuity.
Neither The Cincinnati Life Insurance Company nor its affiliates or representatives offer tax or legal advice. Consult with your tax adviser or attorney about your specific situation.