Income Certainty in an Uncertain Economy

Financial Concerns

I have been working with retirees for a number of years now and I am always interested in what concerns people have when it comes to their finances. There are several consistent answers that continually arise but none more common than income. There are people from all walks of life that are concerned about outliving their money. How do we get through this difficult economic condition, with a volatile market and consistent inflation knowing that at the end of the day there will be enough money to sustain a favorable lifestyle?

It is a valid question and a real concern and without appropriate planning, there could certainly be some very real consequences. There is good news in this story however. There are programs available in the investment world designed specifically for the purpose of income generation. Not just income until you run out of money, but income that CAN NOT BE OUTLIVED. They are called annuities.

 

A great opportunity

Many of you reading this may have experience with annuities and many of you may have heard terrible reviews about annuities as well. Some of the information is true and some should be left by the curb with the trash. What I can tell you, is that annuities present an opportunity to generate a lifetime income stream that can’t be outlived as opposed to the alternative methods of income generation typically used such as a bond portfolio and other market-driven investment options.

I am a registered investment advisor representative and will maintain that there are effective ways to generate income in the securities world that have been used effectively for years. However, none of these methods has the protection of principal that the equity indexed annuity does. These programs allow for growth when the market does well and protection from loss when the market fails. These programs also offer clients opportunities to use certain riders to guarantee income for life while still having the ability to grow the underlying cash value of the account. This enables the investors to have a consistent income stream whether or not the investment performs well.

On top of the income, it also protects and grows the cash value that supports the income with no market downside so that there can be dollars leftover to pass to the investors loved ones if so desired. These riders are so effective that the income stream can persist even past the distribution of all of the original principal and any growth that would have been earned. This is a security that many investors are moving towards with today’s current market conditions. As with any investment vehicle, these products are not right for everyone and certainly not right for all of someone’s assets. However, the equity indexed annuity provides for the opportunity to grow with market potential overcoming the lackluster fixed rates available today and brings protection that almost no other market driven program can offer. It is a nice marriage of features. Being able to add to that, the option for lifetime income with growth opportunity of the base value simultaneously taking place, makes for an attractive offer. For many retirees, the worry of a foregone income stream is now a thing of the past due to the implementation of programs such as these. 

Contributed by David Armbruster, President of the Financial Division of Cornerstone Wealth Advisory Group. This column is for informational purposes only. Please consult an investment advisor prior to any financial decisions.

Top 10 Life Insurance Myths

Life insurance is complex, and there is no one-size-fits-all advice. Don’t let misunderstandings stop you from choosing the right coverage.”

 

Life Insurance. Those two words bring up a number of questions to the average person. We are pretty sure we need it, but we aren’t always sure exactly how much we need, what type we need, how it affects our taxes, and which companies are the best to choose from.

A recent MSN Money news article explains why having a good handle on this information is so important.

“Life insurance is not a simple product. Even term life policies have many elements that must be considered carefully in order to arrive at the proper type and amount of coverage. But the technical aspects of life insurance are far less difficult for most people to deal with than trying to get a handle on how much coverage they need and why.”

The article breaks down some of the more common life insurance questions and gives simple and concise answers to 10 Life Insurance Myths. (Click here for the full article  http://money.msn.com/health-and-life-insurance/top-10-life-insurance-myths)

We have chosen five of these Myths to discuss on our Blog today.

Myth: If I’m single and don’t have dependents, I don’t need coverage.

Even single people should have at least enough life insurance to cover the costs of personal debts, medical and funeral bills. If you are uninsured, you may leave a legacy of unpaid expenses for your family or executor to deal with. Plus, this can be a good way for low-income singles to leave a legacy to a favorite charity or other cause.

Myth: My life insurance coverage needs to be twice my annual salary.

The amount of life insurance you need depends on your specific situation. There are many factors to consider. In addition to paying medical and funeral bills, you may need to pay off your mortgage and provide for your family for several years. A cash-flow analysis can help determine the amount of insurance you need.

Myth: My term life insurance coverage at work is sufficient.

Maybe, maybe not. For a single person of modest means, employer-paid or -provided term coverage may actually be enough. But if you have a spouse or dependents, or know that you will need coverage upon your death to pay estate taxes, then additional coverage may be necessary.

Myth: Only breadwinners need life insurance coverage.

Nonsense. The cost of replacing the services formerly provided by a deceased homemaker can be higher than you think, and insuring against the loss of a homemaker may make sense, to compensate for cleaning and child-care costs.

Myth: I’m better off investing my money than buying life insurance.

Not True. Until the value of your assets exceeds your debt, you need life coverage of some sort. Once you amass $1 million of liquid assets, you can consider discontinuing (or at least reducing) your million-dollar policy. But you take a big chance when you depend solely on your investments in the early years of your adult life, especially if you have dependents. If you die without coverage, there may be no means to provide for them after your current assets are depleted.

The Bottom line is that there are many, many misconceptions about Life Insurance. Considering how vitally important it is to understand such a critical part of financial planning, the best option is to seek advice from a Licensed Advisor.

As one of our previous articles has explained, the right Financial Advisor can guide you in your decision making process, completely free of charge!

Cornerstone has these such representatives at branches across the Nation, who will visit you in your home for a financial analysis at your convenience.

Another article on MSN Money gave a great comparison of the best A-rated insurance companies around. (http://money.msn.com/life-insurance/best-life-insurance-companies.aspx) Cornerstone is proud to work in affiliation with many of the companies featured in the article, plus more than 150 other top-rated Insurance providers.

Contact us today, set up a free Financial consultation, and make sure that you are on top of your responsibility to stay educated about your options in this ever-changing industry.