Article in Kiplinger by Ken Nuss tells how
MEDFORD, OR / ACCESSWIRE / January 5, 2022 / When planning for retirement, the need for cash flow is crucial.
"If your cash flow isn't right, the rest of your investment strategy will become unstable," Ken Nuss, CEO of AnnuityAdvantage, an online annuity marketplace, writes in Kiplinger.com.
The article shows how two hypothetical couples used annuities to cover their retirement-income gaps.
Couple gets immediate lifetime income, $3,000 a month
John and Jane are each 65 and receiving Social Security, which covers all but $3,000 of their basic monthly expenses. They can create that much current income by depositing $728,572 in an immediate joint lifetime annuity (as of August 2021).
Their $3,000 monthly payments will include $705 of taxable interest and $2,295 of nontaxable return of principal. If either or both live to age 91½, the entire principal will have been repaid by then. At that point, the annuity income will be fully taxable but will continue for as long as either one of them is living.
However, their income won't be reduced, and that's where the invaluable insurance aspect kicks in, Nuss writes.
Couple secures future lifetime income, $4,200 a month
Bob and Sam, both age 60, a married couple, plan to retire at 65. They'll need $3,000 a month in additional income when they retire.
They decide to buy a deferred income annuity that will provide lifetime income starting at 80. To give themselves a cushion for inflation, they choose a $4,200 monthly benefit. For the 15 years between 65 and 80, they'll rely on Social Security, investment income and withdrawals from their retirement plans to fill the gap.
They also choose a joint-payout contract, but decline the cash-refund option because they're not concerned about leaving the money to heirs. They buy a deferred lifetime income annuity with a $314,102 deposit (as of August 2021). They decide to sell their bond funds to pay for the annuity, because an income annuity can substitute for bonds in their portfolio.
Each $4,200 monthly payment will include $2,167 of taxable interest and $2,033 of nontaxable return of principal.
"There's no one right answer to retirement income planning," Nuss writes. "However, annuitizing a portion of your savings and insuring for longevity is an optimal way to guarantee income for life and remove the worry about running out of money."
Free quote comparison service
A free quote comparison service with interest rates and lifetime annuity payments from dozens of insurers is available from AnnuityAdvantage at https://www.annuityadvantage.com or by calling (800) 239-0356.
Ken Nuss
Media Contact:
Henry Stimpson
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SOURCE: AnnuityAdvantage