With the creation salary pension

The biggest financial challenge in retirement savings to a consumer shift. Even if you work hard, good investment for many years to reserve funds, retirement success will depend on how you put that nest egg into a reliable source of income

The big unknown: Would you, if you run the money to live than you expected? In the past, the main source of pension guarantee lifetime income. However, with fewer retirement pensions, including retirement annuities as part of the portfolio, access to financial planners in support of this idea, fund companies, brokerage houses and the age of the academic community.

In order to meet this demand forecast of revenue, insurance companies are developing new retirement income product. More significantly, mutual funds and brokerage companies offer an excellent tool to help people figure out how to enter their income annuity plan. Until recently, these companies rarely included in the asset allocation recommendations retirees annuity. “Annuities can be an effective tool, but it is the right person, the right amount,” Christopher McDermott, senior vice president of investor education for Fidelity Investments, said the find.

Provide by way of security if retirees worry that they might outlive savings income is crucial. “A lot of people do not understand life,” Noel said a bkemeier, person in charge of Matilda, a consulting firm. The average life expectancy is 65 years for men 84.2 years old, which is 86.1 years of a 65-year-old woman. But he said, Abkemeier, “there is a 50% chance that you can live longer than life expectancy – it may be more than 10-15 years.”

Although some people ignore longevity risk, others want to protect their present only 4% of gold by limiting them to spend their savings each year. That strategy could backfire if the portfolio value dropped significantly, as they did in 2008. If you do not know when you are going to die, or you will maintain market withdrawals, then you need to look elsewhere for certainty, the consultant said. “Art is an important part of financial planning is to take as many variables as possible off the table,” Christopher clothBronte, executive vice president, responsible for New York Life retirement income security.

The first step in figuring out how to adapt to a whole annuity retirement plan is to use the recently launched Fidelity calculator (www.fidelity .COM / incomestrategy) and MetLife (look for “Retirement Income select” in www.metlife.com). These tools will conduct a detailed analysis of your retirement savings, expenditure and income. They will then help you decide how much you should have in your portfolio invested in stock and bond mutual funds and cash. It will also calculate how much your annuity portfolio, it should be the type of enterprise annuity investment.

Annuities can be complex, inflexible, and some have very high costs. You need to carefully selected products and FIGURË the role it will play in your portfolio in retirement. There are many types of annuities. Here’s a look best kinds: immediate annuities, “the benefits of life,” the insurance variable annuity and longevity

Immediate annuity

Immediate annuity guarantee As long as you live, or at a set amount of time a stable income. Thumb every year instead of 4 percent withdrawal rate rules, an immediate annuity can pay an initial investment of more than 7% per year: This product can stretch your retirement savings. A 65-year-old man who invested $ 100,000 can receive up to $ 7776 a year in immediate annuity rest of his life, or $ 8772 if he invested 70 years old Hersh Stern, who runs ImmediateAnnuities.com said.

In exchange for those expenditures joy of GH, you give up entering the main. These payments stop when you die. In most cases, the payment is still the rest of your life is the same. This can be both a blessing and a curse: you know exactly how much income you get, but the purchasing power will shrink as inflation

Because of these drawbacks, you just want to be part of your money invested in immediate annuity – your net worth never exceeded 50%, said Fu special, often much less

Calculate the amount, add up your monthly basic expenses in retirement, such as housing, food, utilities and insurance . Then subtract guaranteed income, such as Social Security andAny source of pension, buy, income provided to fill any gaps annuity. Keep your m oney rest in emergency funds and investment can grow over time.

Before James Montgomery III, now 79, retired Ponce Inlet, Florida, he was an actuary, DC, and former Insurance Commissioner Columbia. Nine years ago he bought an annuity for his wife to pay the difference between their cost of his pension and Social Security. Annuities will also provide additional income, if he died first, his pension shrink. “Many investment advisers tell you draw down 4% per year, and keep your fingers crossed,” he said. “I like the security, I would not recommend your last penny on consumption annuity, but it is certainly very important.”

He chose the single life annuity for his wife, but not annuity living together, which will provide low payouTS but will cover both spouses as long as they live. Montgomery hoped to maximize the expenses for his wife, because he will have enough money from his pension, if she died first.

He is now 77 years old, his wife bought annuities this year to fill the extra space. In this age when the decision to purchase an annuity, the couple took her family’s longevity in mind. “Her mother lived to 100,” Montgomery said. Through the establishment of an annuity ladder “I bet it.”

It can be considered inflation. The older you are when you buy an annuity, the higher dividend. Instead of buying single pension at the same time, you spread your investment a few, resulting in higher pay when you get older.

Or you can buy an immediate annuity increase spending time, whether it is with the consumer price index or a fixed amount, such as 2% or 3% a year. However, the initial start spending about 25-30% less than they do fixed payment annuity. For example, a 65-year-old man who was New York Life Investment $ 100,000 immediate annuity no inflation adjustments can be $ 6,930 per year for the rest of his life; to increase by 3 percent each year annuity at age 65 is $ 5,168 of annual spending and start 75 years to grow to $ 6,743, $ 7,818, at 80 and 85

Spend $ Jiuqian ○ Liushi three for an immediate annuity can be changed by the company. Montgomery shop around, he found a companyAnother charges $ 13,000 more than for the same pay. He bought through ImmediateAnnuities.com his pension from more than a dozen insurance companies provide quotes Ş.

The benefits of variable annuities with living standards in combination

These annuities are tax-deferred savings and insurance. You invest in a portfolio of mutual funds. In most cases, you do not dig the money for several years, to the relevant investment time to grow. These products guarantee that you will be able to at least a year even if the market tanks withdrew certain amount of money for the rest of your life.

Many products are complex and expensive. However, a new simplified products are sold to MetLife and Fidelity joint sales topped $ 1 billion the first year, which ends in November. If a 65-year-old man in Fidelity / Metropolitan guaranteed pension income growth and investment, he will get his initial investment of at least 5% per year for the rest of his life – a year, $ 10,000 in a $ 200,000 investment, for example,

Money invested in Fidelity portfolio of stocks and 60% times 40% of the bonds, your minimum guaranteed increase, if your investment increases. If your investment is growing faster than your retreat, your annual expenses may rise. However, if your investments plummet, you can still ensure that you lock in the lowest payment. “We’re trying to make it simple,” Jeff Cimini, president of Prudential Life Insurance said. “It is difficult for the villagers to decide how to meet their expenses, if they do not know what their income will be owned by the product.” 1.9% lower than the average cost of a single life annuity charged in annuities and 2.05% for joint life.

Fidelity / metropolitan product is actually Ñ once annuitizes. You can withdraw at any time the value of investment targets. However, if you need to dig some of the initial investment, and perhaps unexpected medical expenses, you can reduce your future guaranteed income.

These variable annuity can be stacked on top of your retirement income portfolio immediate annuity. You can override some of your early and immediate annuity costs, while allowing deferred variable annuities grew up, and later cover rising costs.

Variable annuities can be attractive to people in their late fifties or early sixties who plan in just a few years, and bearThe heart of a large market decline, just as they are about to start taking withdrawals retirement. They want to put money in the future growth of the stock market, but they also wan t to guarantee now locked. “They are in the final sprint stage, they might not have enough emotional fortitude to withstand the economic downturn,” Matthew Jarvis, a certified financial planner, said in Seattle.

Jarvis retired the majority of customers to invest in a portfolio of mutual funds and exchange-traded funds have a balanced cash buffer for five years. But he explained that, in order to select the variable annuity customers lifelong interests, if they are worried about their savings will not last very long term. Jarvis also explained that the security of enterprise annuity will cost two percentage points a year more if he managed a portfolio of funds ratio.

Last year, Bruce Kannenberg assess their own choice, choose the benefits of variable annuities and life. He will turn 64 in January, and plans to retire from Weyerhae user in Federal Way, Washington, in three to five years. In the early 2008 market downturn, he switched his investment of 85% in cash before the market bottomed out. “Keep all cash, is not conducive to long distance, but we are concerned that we have to stay to protect the retirement money,” he said.

Kannenberg seek the help of Jarvis, who showed him a Prudential annuity guarantee minimum Withdrawal Benefit. “Give us a happy middle ground between security and growth potential of the stock of pension funds,” Jarvis said. . Kannenberg and his wife Cynthia, 58, 35% of the investment of retirement savings annuity

With Prudential annuities, funds are basically two pots – pots and pans investment guarantee. Let’s say you invest $ 100,000. The money will go into a mutual fund investment pot, it will still go up or down depending on the market.

But it will also guarantee $ 100,000 pot baseline. You wait a year before you start taking payments, $ 100,000 will “grow up” to 5% per year. (When Kannenberg later annuity 6%). For example, to ensure that the six pot worth about $ 135 000 years, you decide to start taking withdrawals per month. You can withdraw, $ 135,000 5% per year, rest of your life.

Meanwhile, the actual cast potOn is worth $ 120,000. If you need extra cash, you can put all or part of your actual investment (You may also need to pay surrender charges). However, you will lose 5% of the annual guarantee.

Howev uh, let’s say you decide you want to actually invest in security for the payment guarantee more than $ 135,000 pot. Maybe your mutual fund investment is now worth $ 150,000. You can guarantee the amount of 5% per year based on $ 150,000 locks.

Find a good variable annuity immediate annuity is not an option more difficult. Read the prospectus and fees, surrender charges and specific assurance comparison.

Longevity Insurance

It is called longevity insurance in the latest trends annuity. These are super-deferred annuities that begin at about 85-year-old scholar love of longevity insurance, because it guarantees that you will not outlive your savings to pay the most effective work.

And longevity I nsurance, you pay a relatively small number of large expenditures on the road. MetLife and New York Life handful of companies offer the product. If a 65-year-old man at an investment of $ 50,000 MetLife longevity insurance products, he will get $ 35205 a year back to the beginning of monthly payments for the rest of his life 85.

Few people buy these annuities, because retirees do not believe that they will live long enough to get any money. Some versions have a small death benefit, but in exchange for lower spending.

But the longevity of insurance while maximizing your retirement income, you may need money to pay for long-term care and other medical expenses. This is the best, if you think about life insurance too long, rather than as an investment that may never pay. Abkemeier recommendation to invest in your portfolio does not exceed 10% of longevity insurance, so you have enough money for your other needs.

Including the Metropolitan in their retirement income calculator longevity insurance, which makes it easy to see how it fits with other retirement investments. “I think the longevity insurance is a very powerful, transparent, lower cost products, is a misunderstanding,” said Robert Sollmann small scrap products for MetLifeDeputy Vice Director.

Sollmann pointed out that by understanding this safety net is in place, you can be more flexible in many years of investment funds for the former. Maybe you can extract more or you can use some of the released money to buy life insurance for your heirs.