Financial Strategies Group

FINANCIAL STRATEGIES GROUP 32 Second, review your income options. Most income annuities will offer multiple options that guarantee income to continue onto your spouse or other named beneficiaries in the event that you pass away. These "life and survivor" options are often at a lower payout but are an added layer of protection to the people who rely on you. If you elect a life-only payout option, where the income is only guaranteed for one person's life, the payments would cease when that person dies regardless if there are other people who are financially dependent on them. There are also options that offer a cash refund, assuming that the person receiving the income passes away before they've drawn their original investment back out. Of course, the cash refund option also affects the amount of income one can expect to receive. Third, don't put all of your eggs in one basket. Of course, guarantees are nice, but when you purchase an annuity you are giving up control over that money. With annuities, if you withdraw your funds prematurely you could be subject to penalties. Most commonly from the insurance company you bought the annuity from, but in some cases from the IRS as well. Typically, you want to limit your annuity purchase to a minority percentage of your overall net worth, and your goal is to generate just enough income to cover your fixed expenses in retirement. This strategy allows you to live comfortably knowing that your "must-have" expenses are covered but still gives you the ability to access other savings if "wants" or surprises come up. So there is good news for those who are still in their accumulation years. Pensions are not completely a thing of the past, but they do look a little different. With the right preparation and a well thought out savings plan you can still take advantage of predictable and guaranteed income. CHAPTER 5 PENSION ALTERNATIVES 3 2

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