Annuities

Non-hardship Withdrawals

Presented by David Corwin If you’re like most of the agents I work with, you’re running out of ideas to share with your clients or wondering what you can do to improve your client’s retirement accumulation planning. Under qualified retirement plan regulations, generally speaking, you can’t make a withdrawal from your plan unless you terminate your employment or your plan is terminated. You can access your plan money before retirement if you qualify for hardship withdrawals – which is usually a result of death or disability. However, you can take money out of your retirement plan while still gainfully employed by way of a Non-hardship (sometimes called in-service) withdrawals. These withdrawals are only allowed for people who are participants in 401(k), 403(b) and profit-sharing plans, and only to the extent of an individual’s vested balance in the plan. If allowed by your employer, in-service withdrawals can give you access to your retirement assets, thus giving you more control over them. It’s important to note that not all company-sponsored retirement plans offer these in-service withdrawals. Why would your client want to make this type of withdrawal prior to retirement? • More flexible in the investment choices that may not be offered in their current plan. • To simplify estate planning. • Professional Guidance: You may choose to have your retirement plan assets managed by a professional and may need to make a plan withdrawal to make that possible. • Income planning – your client may want to plan for retirement so that they know exactly how much they will have to live on (Roth IRA). The Tax Increase Prevention Reconciliation Act (TIPRA) tax laws now permit in-service, non-hardship withdrawals before age 59½. If the employer plan permits, the employee must also be eligible to take a distribution from the plan, and the funds have to be eligible for a direct IRA rollover. Your clients should request a copy of the Summary Plan Description (SPD). If you ask and no one seems to know where it is, then call the toll-free number on your plan statement and ask a person if in-service, non-hardship withdrawal distributions are an option. If permitted, also inquire if withdrawals will prevent you from further participation in your employer-sponsored plan (be sure to check on this). If it is permissible and you want to make the move, you better make an IRA rollover with the assets withdrawn. If you don’t, that distribution out of your qualified retirement plan will be slapped with a 20% federal withholding tax and federal and state income taxes. Yes, you will also incur the 10% early withdrawal penalty if you are younger than age 59½. Additionally, if you have taken a loan from your 401(k), any in-service withdrawal might cause it to be characterized as a taxable distribution in the eyes of the IRS. Obviously, this IRA rollover possibility isn’t exactly making your plan provider all that happy, but many employees would like broader range retirement options and some would like vehicles designed to produce future income streams.
Annuities

The Important Decision at Retirement

Presented by David Corwin Did you know that, at retirement, you might have to make a difficult decision that could negatively impact your future financial security and that of your spouse? At retirement, you will have to decide how your pension benefit will be paid out for the rest of your life: Should you elect to receive the maximum retirement check each month for as long as you live, with the condition that upon your death, your spouse gets nothing? OR Should you elect to receive a reduced retirement check each month, with the condition that upon your death, your spouse will continue to receive an income? Did You Know… * The decision you make will determine the amount of pension income you receive for the rest of your life? * This decision is generally irreversible? * In making this decision, many people unknowingly purchase the largest death benefit they will ever buy and one over which they have no control? If you are married, federal law requires that, in order to protect your spouse, you must elect a “joint and survivor” annuity payout option for your pension benefits. This guarantees that your surviving spouse will continue to receive at least one-half of your pension income. This concept is sound, except that you have to pay for a joint and survivor annuity payout option: * Your pension benefit is reduced for as long as you live. * If your spouse dies before you, your pension benefit cannot be restored to its unreduced amount. * All pension payments cease when both you and your spouse die. Let’s look at the results of the three most common pension benefit options, using a hypothetical example: Life Income Option: If you receive your pension benefit under the life income option, you receive the maximum lifetime pension payment. If you die first however, your surviving spouse receives nothing after your death. Joint and One-Half Survivor Option: If you elect the joint and one-half survivor option, you’ll receive a lower lifetime pension payment. On the other hand, if you die first, your surviving spouse will continue to receive a lifetime pension benefit equal to 50% of your pension benefit prior to your death. Joint and Equal Survivor Option: With the joint and equal survivor option, you’ll receive a significantly lower lifetime pension payment. Your surviving spouse, however, will continue to receive 100% of your pension benefit if you die first. In making this important decision, you should evaluate the risks associated with retirement income protection funded with life insurance: * Your income after retirement must be sufficient to ensure that the life insurance policy premiums can be paid and coverage stay in force for your lifetime. Otherwise, your spouse may be without sufficient income after your death. * If your pension plan provides cost-of-living adjustments, will upward adjustments in the amount of life insurance be needed to replace lost cost-of-living adjustments after your death? * Does your company pension plan continue health insurance benefits to a surviving spouse and, if so, will it do so if you elect the life income option?
Annuities

Part of the Plan

Presented by Richard Mangiameli When considering retirement income planning, life insurance and annuities should be part of the plan, because they may provide the most direct and efficient way to reach ones retirement goals.
Annuities

Health Care in Retirement

Presented by David Corwin In 2012, men reaching age 65 had an average additional life expectancy of 17.8 years, while woman reaching age 65 could expect to live an additional 20.4 years on average. While estimates vary, a couple retiring at age 65 without private health insurance from a former employer can expect to pay significant out-of-pocket health care costs during their retirement years. For example, estimates show that a 65-year-old couple who retired in 2013 needs about $220,000 to cover medical expenses throughout retirement, a 38% increase from the $160,000 first estimated for those retiring at age 65 in 2002. This estimate applies to retirees with traditional Medicare coverage and does not include costs of dental care, long-term care or over-the-counter medicines. About one-third of individuals that turned 65 in 2010 needed at least three months of nursing home care, 24% more than a year, and 9% more than five years. The national median daily rate in 2013 for a private room in a nursing home was $230, an increase of 3.6% from 2012. The average length of a nursing home stay is 835 days. At a median daily rate of $230, an average nursing home stay of 835 days currently costs over $192,000. With all those statistics in mind, the rising cost of health care in the United States has become one of the primary risks to a financially secure retirement. While lower (than in 2012), this year’s estimate is still daunting for many retirees, and it will consume a considerable amount of a couple’s retirement savings. It is extremely important that health care costs are factored into retirement savings strategies today so that retirees can be prepared to pay their medical bills throughout retirement. With health care costs expected to continue increasing faster than inflation, the time to plan for your future health care needs is now… before you retire. Your ability to enjoy a financially secure retirement can be enhanced by planning for future needs such as:
  • Long-Term Care Services • Are you familiar with the variety of long-term care services available? • If it becomes necessary, what type of long-term care services would you prefer? • How will you pay for any needed long-term care services?
  • Advance Directives • Have you communicated your medical care wishes in the event you suffer a catastrophic medical event? • Have you named someone else, a spouse or family member, to make medical decisions for you in the event you are incapacitated?
  • Paying for Health Care in Retirement • Do you know what your out-of-pocket health care costs might be after you retire? • Are you aware that Medicare, while it covers many health care costs, has significant limitations? • Are you familiar with the various types of insurance that can help pay health and long-term care costs not covered by Medicare?