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Financial Planning Question – Retirement

 

Q: My biggest fear is that somewhere in the insurance annuity couple hundred pages there is something that would allow them to back out of or negate the lifetime payments. Would you be concerned about that? Companies looking at are big ones: AXA, Allianz, Prudential, Met life. Thanks again for taking time to provide some insight into this.

 

A: I would not be concerned with this, with the exception that the company has financial troubles.

The only comment that I would make pertains to both pensions and annuities, regarding the principal of the lump sum cash. You obviously lose control of the principal of the lump sum as soon as you turn on an annuity income stream. There are some riders that will allow you to be able to claim a residual of the original deposit for any beneficiaries or heirs, but typically, if you take the maximum income benefit from day one, your beneficiaries will not have any claim to the residual value of the lump sum after you pass away.

Depending on your income needs and situation, you might be able to invest your funds conservatively to generate a stream of income that doesn’t deplete principal value over time. To determine this, you would need to sit down with someone to work on your income outlook taking into account other fixed sources such as social security and other pensions and then work backwards to determine how much you truly need to live on. To find an advisor near you to give you an objective opinion on this, visit www.napfa.org. This is just another idea……


 

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