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LEARN MORE ABOUT: Retirement Annuities
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How an Annuity Saved Their Retirement
Retirement is often viewed as the golden years, a time when one can finally relax and enjoy the fruits of their labor. However, for many individuals, preparing for retirement can be a daunting task. Saving enough money to sustain a comfortable lifestyle throughout retirement is no easy feat, especially considering factors like inflation and unexpected expenses. Thankfully, many retirees have found salvation in annuities, a financial tool that provides a steady income stream during retirement.
An annuity is a contract between an individual and an insurance company, in which the holder pays a lump sum or series of payments to the insurer in exchange for regular income payments in the future. This income stream can be structured in various ways, depending on the individual’s needs and preferences. The payments can either last for a predetermined period, known as a fixed-term annuity, or for the remainder of the holder’s life, known as a lifetime annuity.
For John and Mary, a couple approaching retirement age, their financial situation seemed dire. They had diligently saved throughout their working years, but due to unforeseen medical expenses, their nest egg had dwindled significantly. It became clear that they needed an alternative source of income to sustain their retirement dreams.
After consulting with a financial advisor, John and Mary decided to purchase a joint lifetime annuity. This type of annuity ensures that both spouses continue to receive payments for as long as they live, providing them with a sense of security and peace of mind. The couple used a portion of their remaining savings to make a lump sum payment to the insurance company, in return for a fixed monthly income.
The immediate impact on their lives was astonishing. Suddenly, John and Mary no longer had to worry about running out of money or making ends meet. The annuity payments provided them with a reliable source of income, allowing them to cover their daily living expenses, pay off remaining debts, and even indulge in a few luxuries they had dreamed of for so long.
Moreover, the annuity protected them from the risk of outliving their savings. In an era where people are living longer, it’s essential to ensure that retirement funds last as long as needed. The annuity acted as a safety net, supporting John and Mary even if they were to live well beyond their life expectancy.
Another significant advantage of an annuity is that it provides a consistent income in the face of market fluctuations. Once the annuity is established, the payments remain unaffected by market ups and downs. This stability shields retirees from the fears of a volatile economy and helps them maintain financial security regardless of external circumstances. It allows them to live their retirement years with confidence, knowing that their lifestyle is protected.
John and Mary’s success story is not unique. Countless retirees have found solace in annuities, benefiting from the regular income stream and long-term financial stability they offer. However, it’s crucial to note that annuities may not be suitable for everyone. Each individual’s financial situation is unique, and it is vital to consult a financial advisor to assess the potential benefits and drawbacks of annuities before making any decisions.
In conclusion, an annuity can be a lifesaver for retirees who find themselves struggling to make their money last through retirement. It offers a steady income stream, protects against the risk of outliving savings, and provides stability and peace of mind in uncertain times. While annuities may not be right for everyone, for those individuals like John and Mary, it was truly a saving grace that allowed them to enjoy the retirement they had always dreamed of.
Just bought a bunch of T-Bills and CD's averaging over 5% and I get to keep my money. Never would I give an Insurance company control of my money to get the same return. LOL!
But in 12 years that $16,560 is only worth $11,490 (and that is if inflation returns to 3%)
Why wouldn’t they just put the entire 550k in the same annuity
Less stress off their portfolio. Less stress to their retirement so they can live their lives and not worry! Love it They could go 5 year guaranteed MYGA 5.75% per year. Peel off the interest then 20 year period certain joint life SPIA
Does the annuity work any different with a 401k/403b vs an IRA?
Josh, Income or Fixed Annuity? For Mid-50-Year-old, current rates for Fixed Annuity Rates (4.75%) vs 3 Year Deferred Income Annuity (6.75%). I calculate break even (Fixed Annuity Account at $0)at 95 Years of Age. The only risk I see with Fixed Annuity is what I can lock after 10 Year Lock Period (understand that's a pretty big risk). Is that would basically the analysis?
Yeah. But the high fees and restrictions on annuities. Id rather have a bond ladder
Not a fan of annuities. Putting my money to work for other people so they can give it back to me after inflation has eaten away its earning and purchasing power. "Here's your $11,000, too bad a dozen eggs costs fifty bucks now."
Edit: added facetiousness for the sake of illustration.
This can be a great option only after
#1 you have delayed your social security (a guaranteed 8% with a COLA)
#2 you have drawn income from a reverse mortgage.( Opportunity cost on the reverse mortgage is 2to3% on the future value of your home
VS
A 7to9% opportunity cost on the money you hand over to the insurance company)
An annuity makes sense if you don’t like to watch the market continuously, monthly income guaranteed for life.
I just got rid of an annuity. To many rules using my money!
Awesome Josh. This is the same way I chose to look at pension income. An annuity for life and it lessens the need for extra cash and market risk.
So against them, so many issues.
I never liked annuities. Yes, they have some advantages. If the market tanks some annuity types will continue to pay the amount agreed upon like clockwork. But they don't pay as well as a portfolio of stocks and index funds. Nor are they as valuable as a good real estate investment. If you buy an investment for a crooked company or a good company acquired by a crooked company they can and probably will screw you out of the money they owe. Or if the company outright fails they can't and won't pay out.
I guess my final word is that if you already have a big fat portfolio (say $3 million+) it's not gonna hurt too much to put a fat chunk of it into an annuity with a reputable company. The chances of you getting screwed because the company decided to screw your or went out of business aligning with a market AND real estate failure is fairly remote.
what annuity are you speaking of that gives 6+ % distribution?
Big fan of annuities. They make retirement planning so much easier and stress free.
Is a annuity much different than a fixed pension?
Great information once again Josh!
First to view and first to comment!!!!! AGAIN!!!! Yeah baby!!!!