Retire Safe & Tax Free - How Much of Your Nest Egg Would You Like Guaranteed?


Surprise, The Answer is Always 100%!

You may have heard me ask this question during one of our Workshops, "How much of your nest egg would you like guaranteed?" The answer is almost always, 100%!

Annuities offer very strong guarantees. The reason why some clients don't have at least some of their nest egg in annuities is because they think that annuities have high costs, poor liquidity, low earnings potential, etc…We need to help them become more educated on the costs, liquidity, earnings potential, lifetime income, etc…of our annuity products because, Annuities make your life better!

Let's take a look at the earning potential, since I think this may be one of the main reasons why clients may not be looking to annuities. I have been talking about opportunity costs with clients and how the crediting potential of annuities compares to other options like CD's. While it is true that products like Fixed Indexed Annuities may be capped on maximum you may receive credited, you need to remember that annuities should be compared to equities, yet have reported significant gains and NO downside risk from sudden and unexpected downturns in the stock markets since their introduction in 1996.

These products are a great safe money alternative. When you compare the crediting potential of the annuity to those other safe money vehicles, you can see there really is either no opportunity costs or very little cost and stronger guarantees, that clients may prefer an annuity over other alternatives.

Comparing Tax–deferred Annuities vs. Certificates of Deposit (CD's)

Which product is the right choice? In different situations, both can be the right choice. When it comes to your specific needs, it is important to determine whether you need ready access to your money for short-term goals or need to put funds away for longer-term goals. Safe money is the money you do not want to take the chance of losing. Both annuities and CD's are great safe money places for your nest egg dollars.

When it comes to which one is better, the answer depends on your individual financial situation, your goals and your objectives. CD's are generally considered short-term vehicles and are used for such goals as saving money for a new car or a down payment on a house. CD's work well for these goals due to their short-time periods. Conversely, Annuities are typically chosen with the intention of holding the contracts for longer periods of time.Annuities are generally used to help save for retirement or protect money that has already been saved for long-term goals. BUT, even though Annuities are thought of as longer-term investments, they can also provide tremendous liquidity as needed too. While the length of the duration period is a key factor, it's easy to see the biggest difference between the two products comes down to how each is treated tax-wise....earnings on CD's are taxed annually, while interest earnings on Annuities are not taxed until withdrawn and subject to your income tax rate at that time. Unless the CD is held in a qualified account such as an IRA, interest earnings in a CD are reported annually and income tax must be paid on these earnings each year even if funds are not withdrawn for income! As you may know, the difference between a tax-deferred program and a taxable program may be considerable.

More times than naught, a tax-deferred program will outperform a taxable one because there are three components at work: (1) The premiums earn interest, (2) The earnings on the premiums earn interest and most importantly, (3) The money you are not paying in current taxes earns interest.

Are Annuities right for you?

The question is, do you have longer-term goals for this portion of your money? Will tax-deferred programs make a difference in your portfolio? Are you concerned with outliving your money? Do you want to eliminate risk from this part of your nest egg? If you answered "yes" to any of these questions, an Annuity may be a prudent choice. Please remember that Annuities are longer-term insurance programs that provide the advantages of tax deferral and provide a "guaranteed income you cannot outlive."

Marc H. Weiss, Archer Weiss Insurance & Financial Services, Inc. Please Call Toll free: 1-800-831-2901 or (818) 610-8560