No two retirees are alike. People vary in: age, life expectancy, health, income, savings amount, duration of employment, retirement age, social security income, employer sponsored retirement benefits, spouses age, spousal longevity and health, retirement income needs, retirement account balances and other factors. That is why retirement annuities are issued with a broad range of features and policy provisions.
There are literally thousands of retirement annuities and policy feature combinations, but only one or two are an exact match to your personal and financial needs. A close match of your needs to policy features is essential. There is an actuarial cost to every option and provision in an annuity policy. You only want to pay for those protections you actually need, otherwise your cash efficiency and your long term yields are reduced.
Assume you own an annuity policy with unneeded features that have an actuarial cost of 0.50%. Instead of a long term yield of 5.5%, you will earn 5%. If your annuity balance starts at $100,000 at age 45 and you elect retirement income benefits at age 70, your loss would be over $10,000. The larger the number of unnecessary provisions and elections in your policy, the more your retirement accumulations will suffer. These losses will affect not only your potential retirement income, but also the wealth you can transfer to your heirs.
Once you have a few good matches for your retirement needs, it is time to run the numbers and weed out those policies expected to under-perform. In “Finding the Highest Paying Annuities” we discuss a number of quantitative ways to screen for long-term annuity earnings potential.
Please work with an expert at matching your individual financial and retirement planning needs to the most appropriate annuity.
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Compliance # CSP_1046 20160504