Minnesota Benefit Association - Membership Benefits - Insurance Services - The security of an old-fashioned annuity can make for smooth sailing



Member Benefits Scholarship Program Financial Services Identity Theft Shield / Legal Services Payroll Services Travel Medical Insurance Program Insurance Services > Auto/Homeowners > Life & Annuity > Term Life > Whole Life > Universal Life > Annuities > Health > Long Term Care > Medicare Supplem. > Dental > Disability > Critical Illness > Endorsed carriers	The security of an old-fashioned annuity can make for smooth sailing Excerpts from Kiplinger's Personal Finance Steady Flow of Income By Mary Beth Franklin, KIPLINGER'S An old idea is gaining ground in the new economy: Guaranteeing a steady stream of income in retirement that you can't outlive. That was the concept behind traditional pension plans. But 21st-century retirees will be looking for ways to turn years of accumulated savings in 401(k) plans and IRAs into reliable streams of income without suffering stock-market upsets. That's why a growing number of retirees are looking at single-premium immediate annuities as a way of creating predictable income. "It's a do-it-yourself pension for a do-it-yourself world," says one retiree. When you buy an immediate annuity from an insurance company, you exchange a lump sum of cash for the assurance that you will receive monthly checks for the rest of your life (or, for a specified period of time). The size of your checks is based on your age and sometimes gender (women get less because they tend to live longer) and how much you invest. How much you get each month also depends on whether you buy an annuity with payouts that cover your lifetime only, your lifetime but with a guaranteed minimum term (so all is not lost if you die prematurely), or your life and that of your spouse. From heresy to gospel Most financial writers used to think that turning over a chunk of a client's nest egg to an insurance company in exchange for level guaranteed payments was sheer heresy -- particularly when stocks were routinely producing double-digit returns. But recent findings show that a retirement portfolio divided between an immediate annuity and a managed stock account could supercharge retirement security, providing both more guaranteed income and larger payouts than from a fully managed portfolio. It makes sense to hedge your bets by using part of your cash for an immediate annuity to establish a guaranteed stream of income while leaving the rest of your money invested for growth. The assets invested for growth can help protect against inflation. A retiree can always buy an additional annuity later in life to increase monthly income and get a bigger bang for his buck because the payouts increase with your purchase age. While you're still counting on growth, by diverting part of your cash to an annuity you reduce the stakes if the market slumps. << Back to Main Annuities Page