{"id":575,"date":"2014-05-31T13:00:44","date_gmt":"2014-05-31T20:00:44","guid":{"rendered":"http:\/\/www.aikapa.com\/Financial_Bites\/?p=575"},"modified":"2017-09-27T14:25:55","modified_gmt":"2017-09-27T21:25:55","slug":"guaranteed-income-at-what-price-an-introduction-to-annuities-a-tool-to-provide-guaranteed-income-but-not-to-replace-your-portfolio","status":"publish","type":"post","link":"https:\/\/www.aikapa.com\/Financial_Bites\/?p=575","title":{"rendered":"Guaranteed income at what price? \u2013 An introduction to annuities \u2013 a tool to provide guaranteed income but not to replace your portfolio"},"content":{"rendered":"

Retirement planning entails finding ways to cover expenses for the rest of our lives when we ultimately cease or reduce our working income. The goal is to ensure that we don\u2019t outlive our assets, regardless of our longevity. Although Social Security is our best guaranteed income\u00a0another tool can also provide guaranteed income: Annuities. <\/span><\/p>\n

\u00a0Annuities are a contract that you enter into with a company (an annuity carrier such as an insurance company). You provide the payment and they guarantee a certain amount of \u2018income\u2019 for a period of time or for life. This is not the same as purchasing a CD or buying a mutual fund since once the annuity is purchased the assets used for the purchase are no longer yours. <\/span><\/p>\n

\u00a0It is clear that annuities can\u2019t beat a well-diversified portfolio in projected performance but they do provide a guaranteed cash flow that a portfolio can\u2019t provide. For example, when you decide to take a lifetime-income stream from an annuity, you are in essence betting against the annuity carrier that you will live longer than they think you will live. This transfer of risk is the true value proposition of any annuity that is based on guaranteeing a lifetime income. It is therefore most important that we use only the guaranteed aspects of an annuity when deciding its place in a retirement plan. It is equally important that we consider the importance of actual purchasing power for the annuity. <\/span><\/p>\n

\u00a0Annuities come in many flavors but can be classified as either fixed or variable types. These types differ in many ways including how the assets in the annuity will grow and how the benefits will be calculated. Annuities can be purchased with a lump sum (immediate annuities) or with regular contributions (deferred annuities). The benefits are received within a year in the first case and at a much later time in the second. Immediate annuities can be useful to fill a specific role in the very near future that requires a guaranteed income stream. Whereas deferred annuities are used when we want to guarantee income at a later date, like retirement (we find this necessary when Social Security is lacking or missing). <\/span><\/p>\n

\u00a0The tax nature of annuities can differ BUT most annuities today are funded with tax deferred dollars so the gain will be taxed at ordinary tax rates. When planning to receive benefits from an annuity prior to age 59 \u00bd make sure you let us review it to ensure that the 10% IRS penalty doesn\u2019t apply. <\/span><\/p>\n

\u00a0Although annuities can be a useful tool in certain scenarios, too often unpleasant surprises reveal themselves (to annuity owners) within the fine print. If you\u2019re considering purchasing an annuity talk to us and let\u2019s review the contract before making your purchase. <\/span><\/p>\n

\u00a0There is NEVER a need to RUSH into buying an annuity. Take the time to determine what will be the best way to deploy your assets and use the best available tools before and after retirement. The goal is to meet your specific goals and have your assets last you through your entire retired life.<\/span><\/p>\n

 <\/p>\n

Edi Alvarez, CFP\u00ae
\n<\/sup>BS, BEd, MS<\/p>\n

www.aikapa.com<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Retirement planning entails finding ways to cover expenses for the rest of our lives when we ultimately cease or reduce our working income. The goal is to ensure that we don\u2019t outlive our assets, regardless of our longevity. Although Social … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[70],"tags":[82,212],"class_list":["post-575","post","type-post","status-publish","format-standard","hentry","category-annuities","tag-annuities-2","tag-retirement-planninng"],"_links":{"self":[{"href":"https:\/\/www.aikapa.com\/Financial_Bites\/index.php?rest_route=\/wp\/v2\/posts\/575","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.aikapa.com\/Financial_Bites\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.aikapa.com\/Financial_Bites\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.aikapa.com\/Financial_Bites\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.aikapa.com\/Financial_Bites\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=575"}],"version-history":[{"count":4,"href":"https:\/\/www.aikapa.com\/Financial_Bites\/index.php?rest_route=\/wp\/v2\/posts\/575\/revisions"}],"predecessor-version":[{"id":828,"href":"https:\/\/www.aikapa.com\/Financial_Bites\/index.php?rest_route=\/wp\/v2\/posts\/575\/revisions\/828"}],"wp:attachment":[{"href":"https:\/\/www.aikapa.com\/Financial_Bites\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=575"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.aikapa.com\/Financial_Bites\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=575"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.aikapa.com\/Financial_Bites\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=575"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}