The 21st Century Pension Plan

Retirement with All the Fixins’

Fifty-six percent of workers expect to receive income in retirement from a defined-benefit pension plan, despite the fact that only 37% of them have this type of plan with a former or current employer.1 Considering that companies have been cutting back on pension benefits, the likelihood of securing a pension to provide retirement income is decreasing.2

One of the most appealing aspects of a traditional pension is a guaranteed lifetime income. Fortunately, you can begin building your own guaranteed lifetime income with a fixed indexed annuity, regardless of the future pension landscape.

Getting Your Fix
A fixed annuity is a contract with an insurance company that can be funded by either a lump sum or regular payments over time. In exchange, the insurance company agrees to pay you an income for a specified period or for the rest of your life.

There are two general types of annuities. An immediate annuity is typically funded with a lump-sum premium. Payments start immediately thereafter and continue for the duration of the contract. A deferred annuity can be funded with either a lump-sum premium or a series of payments over time. Payments start at some point in the future, as determined by the annuity contract, at a rate that reflects the value of any tax-deferred growth during the accumulation period.

Fixed Flexibility
You may have the option of receiving annuity payments that last for the lives of both you and your spouse (or selected beneficiary). In some cases, if you opt for payments that last for a specified period and you die before the contract ends, the income can be paid to a beneficiary for the remaining time period.

The amount of income an annuity will generate depends on the total premiums paid, the contract’s rate of return, the number of years over which payments are to be paid, and other contract provisions.

Generally, annuities have contract limitations, fees, and expenses. Most annuities have surrender charges that are assessed during the early years of the contract if the annuity is surrendered. Withdrawals of annuity earnings are taxed as ordinary income. Withdrawals prior to age 59½ may be subject to a 10% federal income tax penalty. Any guarantees are contingent on the claims-paying ability of the issuing insurance company.

If your clients interested in having a guaranteed source of retirement income and don’t have access to a traditional pension plan, you may want to consider a fixed annuity.

If you have high net worth clients that own a small business and individual pension plan you may want to fund a portion of that plan with a fixed annuity.

Fixed annuities have evolved greatly over the last decade and have become a great source for growth will in deferral and income while in retirement.

If you would like comparisons, case design and education please contact
Stephani Lucas at 858-356-9368

1–2) Employee Benefit Research Institute, 2010

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.

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