Long- Term Care Planning and Annuity Benefits

Have you considered the benefits of annuities and using them to create some long-term care planning along with them? 

It is essential to adapt to the changing landscape and to consider risks during each retirement phase. Creating sustainable retirement income is more important than ever. It is essential to consider these risks to ensure peace of mind and maintain your standard of living.  

While flexibility and constant re-evaluation are crucial throughout the retirement planning process, one product you may want to consider is a fixed-indexed annuity. A fixed-indexed annuity can help mitigate some of the effects of risks that impact a financially secure retirement. Fixed-indexed annuities provide the potential for growth with protection from loss due to market downturns. An optional income rider may help you keep pace with inflation while creating a guaranteed lifetime income you will never outlive.  

It’s imperative to plan, to understand the risks, and to evaluate often.  

The Four Risks an Annuity Can Help Protect Against: 

Inflation risk 

Things do not cost what they used to. From everyday products to cars and houses, inflation drives up the cost of goods and services. 

If you retired in 2000, your income today would have to be 50 percent higher to maintain your lifestyle. For example, $20.00 in 2000 has the same buying power as $30.00 in 2020. Inflation can be a serious risk — and the longer you are retired, the greater its impact. 

Accumulation phase – Inflation is an important consideration when determining the savings amount you will need to achieve your retirement goals. Some may try to delay retirement and continue to work past their planned retirement date. Research shows that 48% of retirees end up retiring sooner than planned due to health problems, disability, company changes, or caring for a family member.  

Income phase – If inflation outpaces your retirement income, you may be forced to adjust your standard of living, so you do not deplete your assets too quickly. 

Market volatility risk 

Anyone with money in the stock market may have experienced a rocky ride. The S&P 500® has lost roughly half its value twice in the past 20 years yet grew roughly 120% over that same period. 

Boom or bust, no one can predict what the market will do or how the financial landscape will change. 

Accumulation phase – If you have set your sights on a financially secure retirement, you may want to limit your exposure to volatile markets. Consider opting for solutions that offer guarantees and protection from downside market risk. 

Income phase – When people retire, their risk tolerance generally decreases. While volatile markets swing both ways, you may not want to ride this roller coaster with your retirement nest egg. Taking money needed for retirement expenses from a retirement account when the market is down can impact your ability to recover when it moves back up. 

Interest rate risk 

Low interest rates can reduce retirement income by lowering growth rates for retirement assets. In low-interest rate environments, conservative strategies focused on asset protection may not provide adequate growth. As a result, assets can be exhausted earlier than expected. 

Accumulation phase – Like inflation, low interest rates during your working years may require you to either postpone retirement and save more now or decrease income later. 

Income phase – If interest rates are less than your target rate of return, you may need to find additional sources of income, or you might adjust your standard of living to avoid running out of money. 

Longevity risk 

People are living longer in retirement than at any point in history. One out of three 65-year-olds today will live past age 90, and one out of 5 will live past age 95. The longer you live, the greater the risk you will run out of money in retirement. 

Accumulation phase – Not knowing how long you might live makes it difficult to determine how much you will need to save to reach your retirement goals. Many people underestimate how long they will live, putting strain on personal savings and increasing the likelihood of outliving their assets. 

Income phase – Not long ago, it was an accepted rule of thumb that retirees could withdraw up to 4 percent of their nest eggs annually without running out of money. Now, many experts recommend a withdrawal rate of just 2.8 percent. A solution that offers guaranteed lifetime income may provide the additional income you need. 

If you have questions about Annuities, our team of Annuity experts is devoted to providing consistent and reliable support for you. EMG Insurance Brokerage is a full-service brokerage general agency based in Houston, Texas. We know it is essential for advisors to access quality products, expert advice, and cost-effective solutions. We follow market trends and continually update carrier offerings. For guidance on how to grow your business, contact us. We are here to support you.