7 Annuity Shopping Tips

When it comes to buying an annuity, it is important that you take time to shop for the one that gives you the most benefits and convenience.

Pension providers offer different deals and these differences, even the smallest kinds, can make a significant impact to your income.

Photo credit:blog.marketamerica.com
Photo credit:blog.marketamerica.com

If an annuity helps to meet your needs, here’s what you need to consider when shopping for an annuity:

  1. Do the math for the payout.

You need to know how much monthly income you are likely to receive. Compute for the payout based on the sum you plan to invest.

  1. Confirm the strength of the annuity.

Be sure to only purchase annuities from renowned financially strong insurance companies. You can check their ratings by visiting sites that provide comprehensive information of companies in the insurance industry such as A.M. Best or Fitch Ratings.

  1. Be sure to check returns.

Make sure that you thoroughly look at how an annuity’s investment returns are calculated. Because of higher fees and expenses, the returns on funds offered by insurers tend to be lower than equivalent open-end mutual funds.

  1. Calculate the expenses.

You need to know exactly how much you’ll be charged in expenses, commissions and fees. Decide to go with variable annuities that charge no more than 2%.

  1. Remember to ask about the death benefit.

Think about boosting the annuity’s death benefit. You need to ask yourself what will your spouse or partner receives if you die before deferred-annuity payments are due to begin.

  1. Increase surrender fees.

Do you know what you will be charged if you decide to cancel the annuity and withdraw your savings? There are annuities that charge a penalty of 6% or 7% in the first seven years.

Also, your gains are going to be taxed as income, and you’ll face a 10% penalty if you’re under age 59 ½ at the time of withdrawal.

  1. Look into low-fee annuities.

Variable annuities offered by major mutual fund companies like Vanguard, Fidelity and T. Rowe Price tend to charge lower fees—around 2%.

Don’t forget that inflation can undercut the value of a fixed monthly payment for life, especially after income taxes are paid. And also, Sales pitches will always sound good, but they still must be carefully evaluated.

For example, many insurance companies encourage you to roll your IRA into an annuity. But annual annuity fees can be as much as 3%, which is much higher than other long-term investment vehicles like mutual funds in an IRA or 401(k), and your rate of return could be lower than expected.

Fees charged by insurance companies on annuities can be relatively high, which eats into your returns over time. Along with this, calculations used by insurance companies to determine rates of returns on some investments are complex and can suppress long-term earnings.

Returns on an annuity investment over time might have been higher if assets had been invested in non-annuity mutual funds. Remember that cashing in an annuity to withdraw your invested assets can be costly, because you may have to pay surrender charges to the insurer.

Some annuities’ rules force your beneficiaries to forfeit part or all of your investment if you die.

Remember that some pension providers specialize in providing annuities that are designed for people that have medical conditions or follow a lifestyle that has a shorter than the normal life expectancy. Some providers may take where you live into consideration.






7 Tips for Working in Retirement

Even if retiring means leaving your job, that doesn’t mean that you can’t seek employment during this point. In fact, survey shows that 54 percent of senior workers report that they’ll work after retiring from their current career. Of this group, 81 percent opt to work part-time, while 19 percent plan to work full-time.

People work in retirement for a number of reasons. Some tend to seek employment because they want to increase their retirement income, while others want to continually challenge themselves stay mentally stimulated through a job.

Photo credit: forbes.com



Whatever your reasons are for working in retirement, here are seven tips that can help you.

1. Build your Network

Before you retire and leave your current employer, talk to your human resources department and other department heads and let them know that you are open for consultant work after you retire. This is a good way to keep your relationship intact with them before you leave.

On the other hand, it’s also essential to broaden your network outside of your employer. Talk to similar companies as well as freelance colleagues you have gained throughout the years and let them know that you’re still up for working after you retire.

2. Highlight your Experience

According to a survey, 77 percent of employers recognize that older workers are more experienced and see this as the top advantage of having them join their organization. Potential employers are aware that you have extensive experience on the job, but how you highlight your edge is what would set you apart.

Apart from that, employers believe that older workers:

  • Are mature and professional (71%)
  • Have stronger work ethics (70%)
  • Are able to mentor younger workers (63%)
  • More reliable (59%)

Basically, employers know that you can be an asset on the team. It’s just a matter of proving them right. As you meet with them and “market” yourself, make sure that you highlight your experiences and qualities that are needed in the position or project you’re aiming for.

3. Do Volunteer Work

Yes, you may or may not get paid for volunteering, but that doesn’t mean that you’ll get nothing out of it. When you do volunteer work, you are actually expanding your network and enriching your skill sets. Who knows? The people you come across with during stint may be instrumental to landing a huge project or job in the future.

4. Delay Social Security

Delaying your Social Security benefits can result to higher payouts in the future. If you decide to continue working in retirement, experts suggest withdrawing your Social Security benefits at a later date or until you reach your maximum retirement age.

Because you have a job, you can use your earnings and other sources of retirement income (i.e. annuity, mutual fund, 401K, etc) to support your expenses at this point and reserve your Social Security benefits for future needs.

5. Go on a Dry Run before you Retire

Part of your retirement checklist is test driving your retirement plan. If working is part of it, then you should include it in your dry run.

Prior to retiring, try taking on freelance or part-time work while you still have a day job. This will give you a feel of what it’s going to be like when you work in retirement, and a glimpse of how the market looks like from a viewpoint of a consultant.

6. Consider your Health

You may want to work in retirement, but will your health allow you to? You need to know if you can handle working in retirement and if so, by how much? The best way to know would be consulting with your physician. Express your intention of working in retirement and tell them that it’s important for you to know if your body can handle it.

Your retirement will not be as enjoyable if you neglect your health. Regardless of what your doctor say, strive to live a healthy lifestyle. Eat a balanced diet, get enough hours of sleep, and make exercise a part of your routine.

7. Work for the Right Reasons

Working in retirement should be far from what it feels like when you’re younger. At this point, deciding to work is completely by choice and you call the shots on how much work you’ll actually take on. It should not feel like a chore. It should feel more like fun and something that you look forward to and not simply an obligation. Whether it’s to augment income or be mentally stimulated, working in retirement should enrich you and not burn you out. Make sure that you’re working for the right reasons.

Meanwhile, some dread entering retirement because their identities seem to be grounded on their job and most of their friends are from work. Though having a purpose and social interaction are essential in retirement, you shouldn’t work solely for these reasons. In retirement, you have the chance to explore other things that are outside the walls of working. Build relationships with new people. Join communities. Learn something new. Take up new hobbies. Spend more time with your family. There’s so much more to life than just working and your retirement should be mostly about that.


Five Money Mistakes to Avoid in your 20s

When you’re young and just starting out in life, it can be difficult to think about the future and begin planning for it today. However, what you do during this stage in your life can have an immense impact over the course of your life, especially in the areas of your finances.

If you’re a twenty-something and you dream of becoming financially successful someday, here are common pitfalls that you need to avoid as early as now.

Photo credit:www.forbes.com
Photo credit:www.forbes.com

1. Not paying yourself first

The feeling of getting your first paycheck is exhilarating, and you’re probably thinking of where you’re going to spend it on? Is it going to be for a weekend trip or for a pair of shoes that you’ve been coveting this season? Though there’s nothing wrong with enjoying the fruits of your labor, you need to step back and be more practical about how you’re going to manage your hard-earned money.

When you get your paycheck, the first thing you need to do is save a portion of your income. One of the reasons why you work is so that you can build a financially secure future for yourself. And you can’t do that if you simply spend all of your earnings.

2. Not having a budget

Young people are usually impulsive and spontaneous. However, that should not be your approach when it comes to your finances. You need to create a realistic budget and stick to it. Having a budget prevents you from spending impulsively and getting into debt as a result of that.

Determine how much you need to save, how much you need to cover all your expenses, and how much you will allot for your discretionary spending. Allow enough wiggle room in your budget so that you can easily adjust if you slightly go over a particular expense.

3. Not accounting for risks

Being young, healthy, and agile doesn’t make you risk-proof. That’s why you need to have a course of action ready should you face an untimely event.

The first thing you need to do is build an emergency fund. As its name suggests, it is a pool of money that’s allotted during the rainy days. Rule of thumb suggests that it should be three to six times worth of your monthly salary, but as you are just starting out, strive to put at least $1,000 in it.

It’s also important to be covered under health insurance. When you have this policy, you are lessening the toll of healthcare costs on your finances.

4. Not setting financial goals

You’re never too young to set goals. When you know what you want, you know what you’re aiming for. Thus, you will be more inclined to do things that can bring you closer to reaching your goals. As you map out your goals, create a deadline. Figure out where you want to be in the next 10, 20 and 30 years. At the same time, you can also create short-term goals. For instance, you can opt to pay off your credit card debt in a year, or increase your savings in six months.

5. Not saving for retirement

Your age is the most ideal time to take advantage of compound saving. You need to start saving for retirement as early as now because the money you save today will definitely worth more than any amount you save in your 30s and 40s.

If you’re employer offers a 401(k) plan, it’s wise to sign up for it. At your age, you can begin with contributing six percent of your paycheck to this retirement savings account. As you add more years in your career, you can continue increasing your contributions.

If you’re in your 20s, strive to start in life the best way possible. Develop good money habits and see the big picture. When you do, you will come out financially strong in the future and you can have the best quality of life that you’ve always dreamed of.


5 Questions You Need to Answer on Your Retirement Plan

Everyone will agree that it is important to save for retirement. However, the amount of money you will need for retirement will depend on your future unique needs.

Knowing your priorities can help you achieve your ideal retirement. You can start by asking yourself what matters during retirement.

Here are the 5 questions you need to have on your retirement plan:

  1. Will you continue working?

Some people enjoy working and continue their jobs even when they reach the age of retirement. However, others prefer to go ahead and enjoy retirement.

You will need to decide whether you will continue your job and delay your retirement a little longer or you will be retiring on time.

If working full-time is not interesting for you, you can try a part-time position such as an adviser or consultant to continue your income.

Other people also choose to engage in part-time jobs to prevent them from getting bored and because they like being busy at times.

  1. Do you prefer to be near family?

Most retirees prefer to keep their family close, either to spend more time with their kids and grandchildren or to have more help as they age.

However, having more people in your house means you have to consider the expenses that comes with it.

There is also the decision of whether people will be moving in with you or you will be the one to move in with your relatives. Either way, there is always the matter of expenses to consider.

If you will be the one to move in, you will need to think about what you will do with your last house.

  1. Any plans of travel?

Traveling can be expensive, depending where your destination is, but it is a common hobby for retirees.

If you do have plans of travel, you may want to try anticipating how often you might travel and where you are going.

You will need to seriously save the funds necessary to travel or find a way to build them into your regular budget.

  1. Do you have any activities in mind?

Your hobbies or activities will take a larger portion of your time once you retire. It will affect where you will want to live and how much you will need to save for retirement.

Some tryout hobbies that can generate income such as baking pastries, service oriented businesses, or setting up a book store.

  1. Any plans of changing your lifestyle?

You need to ask yourself if you will continue to live the way you did before retirement or will you have a change of lifestyle.

One major change will be your income, not unless you own a business which continues to generate money for you.

However, not everyone owns a business and usually relies on their employment for income. Once you retire your main source of income stops. You will need to be mindful on how you spend your limited funds.

Many people attempt to have an estimate of just how much money they will need once they retire, but it can be more difficult to do this properly if you don’t consider the questions above.



Five Mistakes to Avoid when Planning for Long-Term Care

Planning for long-term care is a process and you’ll be facing challenges along the way, but it becomes more manageable if you know the common pitfalls and oversights that you should avoid. Here are some of them.

Photo credit: arvinonline.com
Photo credit: arvinonline.com

1. Waiting too long to plan

Ideally, you should begin to plan for long-term care before you hit retirement, which is during your 50s. Being at this stage in life is a good starting point for planning, especially if you opt to purchase long-term care insurance. Applicants within this age group have higher chances of qualifying due to good health and will likely lock-in affordable rates than those who are older.

More so, planning ahead allows you prepare carefully, and examine all the factors in relation to long-term care. It gives you time to thoroughly explore your options and determine which choices are best for your situation. It’s easy to strategize when everything is going fine, as opposed to making hasty decisions in a crisis.

Decisions made in the middle of a crisis usually result to even more problems. That’s why you need to plan early on or during the time when all is going fine, at least in terms of your health and finances.

2. Thinking it will not happen to you

It’s never safe to assume that you will never need long-term care just because you’re in great shape today. Realize that things can change in snap, accidents happen unexpectedly, and sickness may develop within your system even if you don’t like it.

Current statistics show that 70 percent of those who are 65 and older will need care. Meanwhile this doesn’t mean that those who are younger are risk-free in terms of needing long-term care. In fact, 41 percent of individuals between the age of 18 and 64 will also require some sort of care service.

It’s always good to hope for the best, but when it comes to planning for your future, you need to consider the worst case scenario and plan on your course of action in case it happens.

3. Miscalculating the Cost of Care

Care services can come at a hefty price tag, especially if you end up requiring them for a long period of time. In 2014, here are the average rates for different care services:

  • Homemaker services – $19 per hour
  • Home health aide services – $20 per hour
  • Adult day care – $65 per day
  • Assisted living – $3,500 per month
  • Nursing home (semi-private room) – $212 per day
  • Nursing home (private room) – $240 per day

If you suddenly need care, do you have the financial means to pay for services without impairing your financial health?

4. Underestimating the toll of long-term care to the family

When a long-term care event happens in the family, the first ones to assume the role of the caregiver are family members, especially if the care needed is mostly custodial in nature. Though providing care is usually done out of love, this can have negative impacts on the quality of life of the caregiver. Here’s why.

Most family caregivers experience income loss and financial difficulties. Statistics show that 70 percent of working caregivers experience difficulties in managing their tasks at work and their caregiving responsibilities. Sixty-nine percent admit that they need to change their work schedules, reduce their work hours or take an unpaid leaves in order to attend to their caregiving duties. Meanwhile, five percent turned down a promotion, four percent retired early, and six percent left their jobs.

Apart from money issues, providing care to a loved one also has a toll on a caregiver’s overall wellbeing and relationships with other people such as their spouse, children, and friends.

 5. Not having the necessary advance directives

Long-term care planning is about making your own choices and staying independent as much as possible. However, you need to make these choices and preferences known. You can do that through advanced directives.

Advanced directives are legal documents that state your wishes, requests, and preferences when it comes to health and long-term care. The two common types of advance directives are living will and power of attorney.

A living will states your choices and decisions about health-related concerns that may happen in the future. When you have this document, you can be sure that your loved ones and care providers will act according to your preferences even if you can no longer voice them out. Meanwhile, in a power of attorney, you will name a person who will decide on your behalf when you can no longer do so.


4 Things you Need to Know before Buying LTCI

Though long-term care insurance is an essential policy to have, you shouldn’t rush in to purchasing this policy and grab the first offer made to you. Purchasing long-term care insurance involves going through a myriad of factors to consider.


To help you get started, here are four things you need to know about LTCI , so that you’ll make smarter decisions as you go through the process of buying a policy.

 1. Age and health are major factors.

Age and health play a major role on the application process because these are two of the factors that insurers look at to determine if you’re qualified for a policy and how much your premiums will be.

Experts advise buying a policy early, ideally during your 50s. At this point, you are in great position to get lower rates and you are most likely still in great shape. Most companies offer a 10 to 20 percent annual discount for applicants who apply healthy, and this price cut will continuously be in effect even if you develop conditions later on.

Also, your chances of qualifying are higher when you apply in your 50s. Statistics show that only 17 percent of applicants between the age of 50 and 59 are disqualified, whereas 24 percent of applicants in their 60s are declined.

2. Cost of care varies per location.

Apart from looking at your possible care needs, you also need to factor in where you will receive care as you decide on how much coverage you will purchase. This is because the cost of care varies from state to state. For instance, in Louisiana, the median cost of homemaker services is $14, whereas in New York, the cost averages at $20 per hour.

Location influences the cost of care due to some factors such as a state’s cost of living, supply and demand of labor, and financial strength.

3. Shop around.

Two insurance companies can have a price difference of about 60 to 90 percent for virtually the same coverage. That’s why you need to take time in comparison shopping and reviewing offers from different companies.

However, it’s important to note that price is just one factor to consider. You also need to look at the insurer’s performance, claims payment history, and financial strength. Make it a point to do background checks and make sure that you’re getting coverage from a company that has the strength to stay in business by the time you need to use your benefits.

4. Know which riders to include in your policy

Riders are additional features that you can incorporate in your policy for a wider scope of coverage. These add-ons come at an extra cost, so before you decide on purchasing a rider, make sure that it’s really necessary.

Also, make sure that you’re not paying additional for a feature that’s already incorporated in your coverage. Double check the fine print and see if you can actually do without the add-on. For instance, don’t purchase a home health care rider if your policy already covers all care settings and services.

Riders that are essential to long-term care insurance are inflation protection and shared care rider for couples.

When purchasing long-term care insurance, you have a series of decisions to make, and these are very crucial. These four tips, along with research and advice from professionals, can help you acquire the best coverage for your unique needs and situation.