May 20, 2022 3:02 pm

Bullet Proof Your Safe Money With Annuities

On October 19, 1987, known as “Black Monday,” the Dow Jones Industrial Average dropped 508 points. This was a one-day record loss of 22.1% of the stock market’s original value. Many 401(k)’s became “201(k)’s” overnight. Nearly $600 billion of investors’ assets vaporized instantly. According to an October 11, 1997 Reuter’s news report by Pierre Bellec, he quotes John Geraghty at North American Equity Services: “‘Electronic trading made the ’87 crash much worse because it was the blasting cap on a stick of dynamite,’ he said. ‘The blocks of millions of shares was the spark that set waves of chain-reaction selling into motion, drowning individual investors, institutional (investors) and mutual fund traders.'” People lost thousands of dollars of their hard-earned savings overnight. That money was to help them comfortably live out the rest of their lives during retirement. If this happened to you, how did you feel about it? If it never happened to you, how would you feel if it did? Please, I’m not slamming the stock market, because I invest in it myself. It is one of the best ways to get capital appreciation over a long period of time. Also it’s a great way to get ahead of inflation. However, the reality is that if you put all your “eggs in one basket” in the market, you expose yourself to a greater risk. Your risk is losing a good portion or all of your money with little chance to recover it. Isn’t that money you wanted to live on after you retire? You expected to live comfortably after retirement, right?

How will you and your spouse deal with a lower   Best Lawyers Near Me    standard of living for the rest of your life? An article in Black Enterprise, October 1994, says: “But most ‘people in their 20s couldn’t care less about retirement,’ says: Roberta Berger, a chartered financial consultant and the president of Capital Control Concepts in Rhinebeck, N.Y. ‘Those in their 30s think it’s a good idea. People in their 40s believe they should do it. And those in their 50s say they should have done it when they were in their 20s,’ she points out.” To quote the American Institute of CPA’s, Retirement Planning: Achieving Financial Security for Your Future, 2004: “According to a study conducted by the U.S. Department of Commerce, only 5% of all Americans are financially independent at age 65. 75% of all retirees are forced to depend on family, friends, and Social Security as their only sources of income.” How would you feel about depending on your family, your friends, and your Social Security for the rest of your life? Are they all guaranteed to be there for you forever? The good news is you can avoid a terrible situation for yourself and your spouse by proper planning immediately. You need to make a good portion of your assets your “safe money.” No matter how far the stock market drops, no matter what interest rates do to volatile bond markets, your safe money needs to have a bulletproof vest on. While other investors are on the Titanic, you need to be on a completely different ship, far away in a safe harbor. The way to get into your safe harbor is through the time-tested financial vehicles called fixed annuities. An annuity is a contract between an individual and an insurance company. The owner agrees to pay the insurance company a single payment or a series of payments. The insurance company agrees to pay the annuitant a fixed amount on a regular basis, starting immediately or at a later date. Fixed annuities give you GUARANTEES. You are guaranteed your safe money will be safe – no losses at all no matter how far the stock market drops. Also you will have a minimum interest rate guaranteed to you. Your current interest rate will be determined by the investment performance of the company, but it will never go below the minimum. What that means to you is a sense of security. You are also guaranteed an income that you will never outlive. You won’t worry about depending on family, on friends, and on Social Security as your only means of support. Fixed annuities are SAFE. Very strict state laws mandate insurance companies that offer annuities are to have enough reserves to fulfill their all contractual obligations to their policyholders. Historically, these companies have weathered a lot of financial storms. Investigate the long-term financial strength of a company. Your best bet is to look for an insurance company that has an A.M. Best rating of “B” or better. Fixed annuities give you TAX-ADVANTAGES. The interest you earn with CD’s, money-market accounts, etc. is fully taxable by the IRS. Your gains in an annuity are FULLY TAX-DEFFERED under current tax laws. If you own an annuity, you give up less money to Uncle Sam every year yet make more money rather quickly, interest earning from interest, year after year.

When you start receiving income payments from your annuity years later, you will probably have gotten into a lower tax bracket. You will have lower tax payments on your annuity payout. You also have a higher effective yield on your money, more than in a taxable interest-bearing CD. And again no matter how much you gain, you will never lose it when the market drops. Isn’t that a good deal? Wouldn’t you want to have more spendable money and more enjoyment in your life? But talk to your tax adviser, tax attorney, or accountant first. Fixed annuities can completely bypass PROBATE. Only the monies in annuities can avoid probate. First, all the details of the estate are “in the street” immediately as it is public information. You have no confidentiality at all about your assets. On top of that says: “In a nutshell, there are two big problems with probate:

It usually ties up property for months, sometimes even a year.
It’s expensive. Attorney and court fees can take up to 5% of an estate’s value.”
Your loved ones may not avoid probate completely, but with an annuity, your safe money will pass into their hands immediately with no hassles nor headaches for them. What that means to you is that you will be secure in the knowledge that your heirs will receive the largest possible amount of your estate. Fixed Annuities give you OPTIONS. If you need ready access your funds, you get free withdrawal privileges without surrender charges, usually 10% annually (after you’ve held the annuity for at least a year). What that means to you is security in knowing that in an emergency, funds are available. Many annuities give a nursing care rider which gives you access to funds without a penalty to help pay for your nursing care expenses. Many annuities also give you a terminal illness rider to allow you to access your funds without penalty.
Depending on your state’s laws fixed Annuities may give you ASSET PROTECTION. For example, California law protects your annuities and life insurance policies from creditors within certain limits. (We suggest you check with your attorney or tax advisor.) In a February 25, 2002 article from USA Today called “Lay Bought Annuities Creditors Can’t Touch,” it says: “Cry for Argentina, but don’t cry for Ken Lay. The former Enron CEO, whose wife said on the Today show that they face a ‘liquidity crisis,’ are guaranteed about $400,000 a year in income starting in 2007. “Unlike the Lays’ other assets, which are threatened by lawsuits, Texas state law puts annuities out of reach of creditors and plaintiffs’ lawyers. “Two years ago, Ken and Linda Lay purchased annuities from Canadian life insurer Manulife. As of a month ago, according to a source familiar with the transactions, their combined accounts were worth $4.7 million. The Lays’ annuity plans, purchased through Houston financial planner Rocky Emery, guarantee a 6% annual return starting in 2007.” You may love Ken Lay or hate him. The point is he created a safe harbor for his finances. The Lays bulletproofed their safe money and are set for life. Have you done the same for yourself and for your spouse? Richard W. Duff, J.D., CLU in The Journal of Financial Planning said: “Under the right circumstances, annuities can work magic. They may solve a troublesome problem, or improve the overall financial picture even when no issue exists.” Need I say more? To repeat: The good news is you can avoid a terrible situation for yourself and your spouse by proper planning immediately.

Karen Mckim-Schurga is a licensed agent of Bankers Life and Casualty Company in Boston, Mass. She can be

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