Your Insurance Matters: Annuities Offer Retirement Security

Your Insurance Matters
Annuities Offer Retirement Security
by Shirley R. Lamdan, CLU, Hagerstown, MD

Fixed annuities have always offered retirement protection and security. While the financial world has sometimes teetered on the brink of ruin, fixed annuities have proven their value over and over again by providing financial security.
Between 2007 and the second quarter of 2009, retirement funds lost about $3.6 trillion. Private pensions shrank by $700 billion; public employee pensions lost $800 billion; and $1 trillion was lost by IRAs.
Annuities, on the other hand, held stable during the financial storm. Annuities helped policyholders sleep peacefully at night. On a yearly basis, annuity sales exceed $200 billion.
A retired policyholder of mine bragged that his annuities kept his retirement money coming while his friends saw their incomes drop due to plummeting equities and low CD and bond rates.
Market losses can be especially hard on people who are newly retired or just entering retirement. These slumps in values can cause people to withdraw larger than planned proportions of their benefits -- and much too early.
Recent market volatility has prompted many to adjust retirement plans. In a recent study, more than 42 percent plan to delay their retirement. Their planned retirement age is now 68 (from their previously planned age of 62). Almost 30 percent of Americans plan to return to work after retiring.
As so many Americans enter retirement, the Obama administration has endorsed the power and value of annuities. The administration even proposes to use annuities to help solve the retirement crisis.
My retired policyholder was very careful when purchasing his fixed annuities. You might also wish to benefit from a few reasonable guidelines. First and perhaps most important, consult with an independent life insurance professional who enjoys comparison shopping for his/her policyholders. Make certain your independent agent considers only insurance companies with excellent financial ratings.
The prudent independent agent will also advise limiting the dollar amount deposited in any one annuity. The deposit amount should not exceed the level of your state's guaranty fund. (In the event of an insurer's insolvency, states have industry-backed guaranty funds. These provide back-up coverage protection. You can visit www.nolhga.com to find your state's guaranty fund limits.)
Laddering of annuities, sometimes referred to as a slow-purchase strategy, might be prudent. This is accomplished by acquiring annuities over a period of several years. That way, you might take advantage of different maturity dates and various interest rates.
The recent volatility of our markets illustrates again that not all investments are appropriate for the retiree or near retiree. The nightmare of outliving retirement savings became a shocking reality for many.
Each retirement planning situation is unique just as each retiree's objectives and attitudes are different. The annuity is a retirement funding vehicle that might deserve careful consideration.
Since annuities vary in their benefits, features, design, interest rates, and company financial strength, the role of the independent insurance agent is vital to the selection of the appropriate product.

Since 1982, Shirley R. Lamdan, CLU of Hagerstown, MD has been serving individuals, corporations, and nonprofits with independent retirement and insurance services. She can be contacted at 301-791-9427 and slamdan@lamdanselect.com.