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Steps to prepare for the rainy days ahead

Posted: March 10, 2009 12:09 a.m.
Updated: March 10, 2009 4:59 a.m.
If you are like many of the people we talk to lately, most tell us they are moving to conservative holdings in their retirement or long-term investment plans.

This is a normal reaction when our savings and investments are experiencing the radical ups and downs of the market. Added to our losses, we see our leaders playing politics rather than doing what's right to fix it.

For most investors, the loss in confidence may result in a "sit and wait" mentality which may negatively affect your retirement income plans. If you are like most Americans, you have seen a loss of 30 percent to 50 percent of your retirement assets in the last 12 months as the depth of the financial crisis unfolded. And, we have seen the majority of our leaders in Washington present costly solutions.

Added to that, we taxpayers in California have additional concerns and costs with our state budget shortfalls.

What can you do? You can hire an IRA repairman who can maybe come up with a fix-it strategy to rebuild your retirement income in a volatile market.

Following are recommendations that may be able to help you rebuild the losses in accounts, restore confidence in your retirement savings plan and help achieve your goals for the future.

These are basic steps of a variable annuity with a guarantee income rider when consideration of a variable annuity is appropriate and fits your retirement goals and needs:

n Set a floor - once you start a variable annuity contract with a GMWB (Guarantee Minimum Withdrawal Benefit), your benefit base is locked in and can never go lower, as long as you do not take more than the allowed withdrawal amount each year.

n Regain your footing - the annual credit in the GMWB for deferring withdrawal will help rebuild your retirement income value. The annual credit for most contracts is 10 years, and applied to the benefit base, not the contract value and is not available in cash or as a lump sum.

n Step-up feature - when the market rebounds, you can participate in the upside potential when the market outperforms the minimum growth guarantee. The step-up feature is part of the GMWB of most variable annuities that offer optional income riders. It also resets the credit mentioned above for 10 years any year the market outperforms the minimum growth credit.

It is important to understand that GMWB are optional benefits available with variable annuity contracts and cannot be elected without purchasing the annuity contract.

It is always recommended to discuss variable annuities and the GMWB riders available with your financial adviser as variable annuities and the riders differ from one company to another in features, costs and benefits.

One good outcome of this financial crisis is Americans are watching their spending, saving money and preparing for a rainy day.

We all are aware it sure has been raining a lot lately.

Jim Lentini, CLU, ChFC, IAR is President of Lentini Insurance & Investments, Inc. He can be reached at (661) 254-7633. His column reflects his own views and not necessarily those of The Signal.


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