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Jim Lentini: Retirement with guaranteed solutions

Business Commentary

Posted: October 25, 2010 10:12 p.m.
Updated: October 25, 2010 10:12 p.m.

With our current state of the economy, politics and deficit spending of our federal and state governments, people are concerned how to balance saving for retirement and being able to maintain their lifestyle in retirement. Only 20 percent of Americans say that they are “very confident” that they will have enough money in retirement to last their lifetime, according to the April 2010 Employee Retirement Confidence Survey.

For more than a decade, variable annuities with guaranteed income features have been helping people protect their lifestyle in retirement.  When these various innovations first came to market, they filled a need helping people with systematic retirement planning to accumulate, protect and provide for guaranteed retirement income. 

Everyone is well aware of market volatility, and what inflation does to fixed income. Guaranteed income solutions on variable annuities have the potential for growth, and if properly structured can offset potential losses.

The private sector doesn’t have the advantage of government pensions, which are credited with automatic 3 percent inflation increases. And the private sector mandatory Social Security benefit is again not receiving an inflation increase for the second consecutive year, greatly impacting many of the 58 million income recipients of Supplemental Security Income.

Retirements can last 20 to 30 years or more. One member of a 65-year-old couple today has a 50 percent chance of living to age 92, and a 25 percent chance of living to age 97, according to The Society of Actuaries 2000 Annuity Tables. Your income needs to be guaranteed to last as long as you do.

It is important that investments for your retirement needs are able to increase and lock-in growth in order to combat inflation. People with some portion of their retirement funds in products with the guaranteed withdrawal benefit have the potential to grow their guarantee income — both before retirement and well into retirement.

In the case of a variable annuity with a guaranteed withdrawal benefit rider, it is important to understand the basics, features and how they work. You should weigh the costs associated with the guarantees against the benefits offered.  And it’s imperative to search out an insurance company with a history of financial strength. Since federal and state regulations require companies to maintain assets above the value of guarantees of their life insurance and annuities contracts, only a few companies can offer these guarantee income riders. Work with someone who understands these products, read the prospectus before investing in any variable annuity with a guaranteed withdrawal benefit and make sure you understand the expenses, fees, and surrender charges.

Remember, paying attention to systematic planning today determines what your retirement lifestyle will be tomorrow. “Make a plan, and work the plan.”

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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