Several articles available have pointed to recent Federal Reserve meetings that indicate plans to keep interest rates near zero through 2014. That means we likely have nearly three years of the same issues to deal with.

The article linked here mentions all objectives behind keeping rates low for the foreseeable future, most notably an attempt to keep long-term rates low in order to spur economic investment and growth. While this may be a useful step toward reversing the economic lull of the past few years it sure doesn’t give the retirement investor a lot of options.

So, how does a person develop a reasonable game plan in this environment? For every individual there is a balance between different strategies and products available to accomplish each goal. Here are a couple of options:

Guaranteed Lifetime Income Products allow you to achieve a base level of guaranteed income in the future. By doing this with a portion of your assets your future income needs are met and additional assets can be used to pursue greater returns with less risk to your overall portfolio.

Short-Term Index Annuities allow you to keep assets safe for the time being with greater potential to outpace currently low interest rates. Short time periods are key so that you are able to reposition assets when the economic climate changes.

Secondary Market Annuities offer safe money yields that stand above historical average interest rate levels. This presents a unique opportunity to achieve substantial growth while maintaining high levels of safety.

These three options show just a few of the ways you can take positive action against the dismal conditions that exist. Just remember the idea is safety in combination with growth. The last thing you want to do is go backwards.

Feel free to call us for a straightforward talk about how you can improve the outlook for your retirement income plan.

Have a great week!

Bryan J. Anderson
800.438.5121
bryan@annuitystraighttalk.com

Read The Post Here: Low Rates Expected Until 2014

Let’s see an example that everyone can relate to…

Assume a purchase price of $282,951 where monthly income payments of $1500 begin one month from today and continue for 360 months. The effective annual yield is 5% and aggregate cash flow comes to $540,000.

Everyone has seen this similar loan and repayment amortization schedule with a conventional mortgage. With a mortgage you would be the borrower but with a Secondary Market Annuity you are essentially the lender.

The payments outlined above can be a good example of a 30 year mortgage or it could be an excellent income stream from the secondary market. Either would be calculated exactly the same way.

With Secondary Market Annuities many people want to assume that the $282,951 is simply growing at 5% for 30 years, but this is not the case, just as it is not the case with the amortizing mortgage either. Why is this? When money is paid out, the compounding asset balance shrinks.

Every payment on an amortizing mortgage is part interest and part principal, and Secondary Market Annuities are no different- each payment includes a interest earned plus a return of principal.

Alternative  Way of Looking at Secondary Market Annuities Yields:

There is another simple way to look at it so let’s have another example. Assume you placed $282,951 in a savings account earning 5% effective annual interest (unlikely, I know). If you were to withdraw $1500 per month, after 360 months you would have collected $540,000 and the account would be empty. While you are in fact earning 5% interest, you are not earning interest once the money comes out of the account.

The calculations for these returns are slightly more complicated than simple money X interest rate X time formula. $282,951 growing at 5% for 30 years would compound to $1,222,886 which isn’t the case here. Money at work in the account earns interest while money in your pocket does not.

So this indicates that not all income deals in the secondary market are appropriate unless the structure meets specific objectives for your retirement plan. Immediate income works for some people and deferred income or future lump sum payments work for others. Which one is best for you?

There are several ways to capitalize on the secondary market. What we have are above average interest rates and extremely high levels of safety, and a variety of available cash flows. The rate and safety are a compelling proposition in any economy and especially true now. The only thing to determine is what you are seeking, and then match your goal with an available offer.

To maximize the strength of this market, use the right tool for the job- don’t buy an income stream if you have no need for the payments. Instead, let it defer and accrue a few years! Likewise, don’t buy a 10 year deferral annuity if you need money every month.

Please don’t hesitate to call us if there are any specific questions you have about how the secondary market for annuities works, and for assistance selecting the right offers for your specific situation.

Have a great week!

Bryan J. Anderson
800.438.5121
bryan@annuitystraighttalk.com

Read The Post Here: Calculating Yields in the Secondary Market

Retirement Annuities

The tools used to maximize pre-retirement asset accumulation are not the tools of retirement  income generation.  Maximizing retirement income is just outside the scope of expertise  for most traditional advisors and individuals because  of the biggest unknown: life expectancy.

An  individual seeking to maintain full control over their money, and setting their own withdrawal rate,  is carrying their entire longevity risk on their shoulders.  And an advisor that recommends a withdrawal rate or a stock / bond allocation to a client is making that client shoulder their entire longevity risk perhaps unknowingly.

This excellent article looks at various ways people consider using their assets in retirement.  It’s worth reading in its entirety, but what is fascinating is that annuities rightfully get their mention at the top of the list as a smart allocation for a portion of your assets.  This is uncharacteristic for main stream media, which  usually scoffs at annuities.

How to Cash Out in Retirement

A look at four strategies that could help make a retiree’s savings last a lifetime

By ELEANOR LAISE

There’s no rest for retirement investors. They spend decades worrying about the best way to put money into their accounts—and then they have to find the best way to take it out.
While saving for retirement can be tough, finding the right way to spend down your nest egg may be an even bigger challenge. Francis Kinniry, a principal at Vanguard Group, discusses some spending strategies with WSJ’s Eleanor Laise.

It’s a problem that’s starting to hit home for the oldest baby boomers, who turn 65 this year. Many don’t have traditional pension plans to dole out steady paychecks for the rest of their lives. They have to figure out the best way to pull money from retirement accounts so that they get a livable income each year—and the money doesn’t run out too soon.

And that means they have to account for a host of factors that are impossible to predict. “You can’t control how long you’ll live, which is a huge determinant of retirement income,” says Francis Kinniry, a principal at Vanguard Group. “And you can’t control the markets.”

Many people are dealing with the uncertainty by simply working longer. But for those who were looking forward to a more retiring retirement, there’s fresh hope.

Financial advisers are rethinking retirement-spending rules of thumb and coming up with new withdrawal strategies that help clients maintain their standard of living regardless of the stock market’s ups and downs. And financial-services firms are introducing new products to turn lumps of retirement savings into steady income without requiring people to lock up their money in an annuity. (Annuities, of course, may still be a good retirement-income solution for some people.)

Making the Case to Buy an Annuity

Below, we explain various strategies for spending down retirement savings. But don’t feel compelled to choose one and follow it for a lifetime. The key to developing a successful strategy is flexibility, retirement experts say. Given all the variables in retirement spending, advisers suggest that investors regularly revisit their approach rather than religiously following a preset path. Those who are willing to make small adjustments along the way will run the smoothest course through retirement.

Regular readers of Annuity Straight Talk should smile at this line, above. Flexibility has always been one of our guiding principles, together with Profitability and Safety.

Reviewing the 4% Rule

Faced with the question of spending in retirement, many financial advisers fall back on “the 4% rule.” With this approach, investors withdraw 4% of their retirement balance in the first year of retirement, or $40,000 from a $1 million portfolio. The dollar amount of the withdrawal is adjusted each year to keep up with inflation, and the remaining portfolio is rebalanced to the desired mix of stocks and bonds.

See how long a $2 million portfolio might last.

Different investors may follow different versions of the rule, such as initially withdrawing 5% or 6%. That initial withdrawal amount can have a major impact on the strategy’s success. Assuming a mix of 60% stocks and 40% bonds, an investor initially withdrawing 4% has a 10% chance of running out of money at age 97, according to T. Rowe Price Group Inc. With a 6% initial withdrawal, he has a 10% chance of running out of money at age 82. Many advisers have settled on 4% as the “safe” initial withdrawal rate.

The 4% rule helps manage two big risks in retirement: longevity and inflation’s tendency to gnaw away at your purchasing power, says Stuart Ritter, a financial planner at T. Rowe Price.

The rule also has the allure of simplicity, and at least in the short term, it gives investors steady amounts of spending money each year. The problem, critics say, is that this approach matches a rigid spending rule with an investment portfolio that can bounce all over the place. Given strong markets, investors may wind up with lots of money to leave their heirs. Given weak markets, they could run out of money halfway through their retirement.

“This is a prescription for getting people into serious trouble,” says Laurence Kotlikoff, economics professor at Boston University.

The 4% rule should be viewed as “a starting point,” Mr. Ritter says, adding that it “gives people the ability to adjust along the way.”

Getting Flexible
Another simple approach to retirement spending is to withdraw a set percentage of the portfolio each year.

Unlike the 4%-plus-inflation rule, this approach automatically adjusts an investor’s spending in response to market performance: If the portfolio grows, the withdrawal is larger; if the portfolio shrinks, the withdrawal is smaller. And investors will never completely run out of money.

Of course, that means there can be major fluctuations in the amount of spending money from one year to the next. Given that many people want to maintain a steady standard of living in retirement, those ups and downs can be stomach-churning.

Vanguard suggests a more flexible version of this strategy. Aim to withdraw a set percentage of the portfolio each year, but place upper and lower limits on the dollar amount, based on the prior year’s spending.

For example, an investor may decide that he’ll withdraw 4% of his portfolio each year, but he doesn’t want his spending amount to change more than 5% from one year to the next. Let’s say he took out $40,000 from his $1 million balance last year, and this year strong markets have boosted his portfolio to $1.1 million. A strict 4% withdrawal would give him $44,000 in spending money this year, but given his 5% spending band he’ll limit his withdrawal to $42,000.

This is “a middle-of-the-road approach,” says Vanguard’s Mr. Kinniry. Spending levels remain relatively steady year to year, but the strategy also responds to changes in investment performance, helping the portfolio last through retirement.

The bands around the dollar amount of spending don’t have to be symmetrical, of course. Mr. Kinniry suggests allowing for more flexibility on the downside than on the upside. For example, you might cap the year-over-year increase in the withdrawal amount at 3%, so that in a good year you keep more of your profits in your portfolio—but if your investments take a beating allow withdrawals to fall as much as 5% or 10%. If markets perform poorly, “you don’t want to compound” the effect on your portfolio by taking a large withdrawal, he says.

Let’s again assume that the investor took $40,000 last year from his $1 million portfolio. But this year his investments fell in value to $850,000. A strict 4% withdrawal would be $34,000. With a maximum 5% drop in the dollars he withdraws compared with last year’s $40,000, he would take out $38,000. With a 10% maximum drop, he would take out $36,000.

Build a Solid Foundation

To build confidence that a portfolio will sustain a lifetime of spending, it helps to take a page from the playbook of defined-benefit pension plans, advisers say. With this approach, investors should think of each year’s spending as a liability that must be matched with a chunk of your portfolio.
The best match for those liabilities is a bond ladder, advisers say. With high-quality bonds such as Treasurys maturing in each year of retirement, creating a “spending floor,” investors can feel confident their future spending needs will be met.

Umm…. Might I introduce Secondary Market Annuities??? These fantastic fixed income investments are of comparable credit quality as the best bonds, yet with yields in the 5-6 and even 7% range….  Hello!! Opportunity is Knocking!

Pouring all your money into bonds, of course, can reduce your portfolio’s growth potential. But it’s possible to create a mix of steady income, upside potential and some longevity protection by starting retirement with a blend of 80% bonds and 20% stocks, says Jason Scott, managing director of the retiree research center at investment advisers Financial Engines Inc.

With bonds to meet your basic spending needs, “you’re not subject to the vagaries of the [stock] market for that spending,” Mr. Scott says. And if the equity allocation does well, investors can use the stock-market proceeds to extend their bond ladder further into retirement or raise their spending floor. So payouts won’t drop when the stock market falls, but they can rise when stocks are rallying.

You can read the rest of the article here.  Annuity Straight Talk focuses on the maximum profitability portion of your Safe Money allocation- get the most income with the least risk.  Come talk to us and see what we can do for you.

Read The Post Here: On Cashing Out In Retirement

Is your pension in a similar state?  Or worse, are you hoping for year after year of 10% compounding gains to rely on to turn into income?  It might be time to rationalize expectations, and put true guaranteed income in place.

Judicious use of annuities can provide the floor of security and income for individuals.  It only makes sense to use your assets to lock in the security you need, and not rely on underfunded pension plans that can’t come to grips with economic reality.

Here's the article:

It’s been a tough year for corporate pension plans. Weak stock markets and falling interest rates have left a $440 billion hole in the nation’s 100 largest plans, with the shortfall more than doubling in the third quarter…. Read On.

Source: WSJ

Read The Post Here: The $440 Billion Pension Gap

At Annuity Straight Talk we encourage you to learn all you can about annuities so you can independently verify what we recommend, or what any advisor you chose to work with presents you for consideration.  As many know, we often recommend Secondary Market Annuities as a very high credit quality alternative for investors seeking a yield above market for comparable safety. 

Recently, a reader who inquired about Secondary Market Annuities did some research and wrote back,

Brian,

We just wanted to let you know that we are not interested at this time to purchase any SMA's, after reading several articles about insurance company's being able to opt out of these contracts in app. 35 states.

 Thank you so much for your time.

As it’s easy to get turned around in the World Wide Web, we thought it would be beneficial for all to read our response:

The article referenced is here.  It may require a registration to that site, but the registration is free.

http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20100228/REG/302289992

Our response to the reader is as follows:

The article you referenced points to the proliferation of a ‘secondary market for annuities’ which is actually unrelated to the contracts I promote on my website.  It is confusing, however, due to the similar name both transactions share.

In fact, the contracts I promote are more properly labeled ‘resale of structured settlements’ and come in the form of a payment stream (an annuity) from an insurance company.

We call them “Secondary Market Annuities” because they are annuity payment streams being bought on the secondary market.  Unfortunately, regular annuities being re-sold would share the same title, and therein lies the confusion.

Secondary market annuities as mentioned in the article have to do with investors buying an annuity in the name of someone else.  Why would someone do this?  Because certain annuity contracts have death benefits attached to them. 

Take for instance a variable annuity with a death benefit.  If the owner dies when the market is depressed, a death benefit of the original investment amount plus interest will be paid to the beneficiaries.

Now, the problem with this sort of transaction is that groups of wealthy investors and attorneys got together and solicited terminally ill people.  The investors purchased annuities with a death benefit while naming themselves beneficiary and a terminally ill individual the owner.  It offered a risk-free way to invest in the market by leaving the insurance company on the hook for a death benefit. 

The problem is that it went contrary to the spirit of offering protection for people saving for retirement while trying to protect family members.  It falls in the same category of transaction as ‘stranger oriented life insurance’ and other viatical transactions.

Many regulators felt that investors were taking advantage of terminally ill people and the result was a series of laws that allowed insurance companies to cancel certain benefits if contracts were transferred.  I personally believe that was the right thing to do.  Contractual guarantees are put in place for very good reason and I feel any effort to exploit that should be stopped.

But comparing those “stranger originated transactions” to the structured settlements we promote at Annuity Straight Talk is like comparing apples to oranges, as they say. 

The transfer of the Secondary Market Annuities we sell- more properly labeled ‘resale of structured settlements’- is regulated by an act of Congress in 2001 that produced HR 2884 and is found in Internal Revenue Code 5891.  As of 2008, all but a small handful of states enacted laws governing transfers to mirror the federal statute.

In summary, the legislation and tax guidance cited states that a structured settlement may be resold and that if it follows a proscribed process involving the Court in the state where the original settlement originated, that the transfer of payments would retain its tax treatment and not be subject to a penalty taxation.

As a result, each of the transactions we promote has a Court date wherein the transaction needs to be reviewed and approved.  Court orders must be in place and all documents reviewed and approved prior to funding.

The transfers we promote receive a substantial amount of due diligence from our legal counsel for your benefit and ours.  As such they offer the highest levels of safety and retirement income efficiency.  Each case is treated with exhaustive care and the result is the greatest amount of benefit for our clients, all firmly within the confines of state and federal laws.

It’s critical to perform due diligence and this article (cited above) is important if you are considering the purchase of a stranger-oriented life insurance policy or an annuity contract on the secondary market with a death benefit attached to another party’s life.  But it’s equally important to understand the differences between that marketplace and the structured settlement market.

We hope this discussion and links are useful to our readers.  We welcome any additional thoughts or questions- simple email us or leave a comment below.

Bryan J. Anderson

Annuity Straight Talk

800-438-5121

Read The Post Here: Secondary Market Annuities Are Not Viaticals

This is a relatively new but growing industry that seems to be skating a fine line of laws.  It's our understanding that ERISA- the laws that govern pensions- prohibit this sort of transaction.  We're not experienced in this marketplace and of course would recommend any reader to proceed with caution.  Please let us know your experience and we welcome any comments or discussion below.

A U.S. Senate committee is considering tackling a burgeoning and controversial business in which veterans and other retirees sell some of their future pension income to investors, with an array of middlemen profiting from the transactions.

"The sale of pensions to investors in secondary markets is a worrisome new practice that deserves careful scrutiny," said Sen. Tom Harkin, chairman of the Health, Education, Labor and Pensions Committee. "In tough economic times, hard-working people are often forced to make difficult choices between immediate economic needs and their future retirement security.

"However, it is critically important that people forced to make these tough decisions have the information they need to make wise choices, and don't fall victim to unscrupulous or illegal practices."

Mr. Harkin, a Democrat from Iowa, said he plans "to take a closer look at these issues in the coming months to ensure that our laws are respected and pension participants are not abused." A committee spokeswoman said it is early in the process, and the senator declined to elaborate on possible courses of action.

As The Wall Street Journal detailed in a story earlier this month, financial middlemen have helped to set up websites with names such as BuyYourPension.com and pension4cash.com to connect pension recipients.

The pensioners need immediate cash; the investors are lured by promises of higher returns.

The market plays off several current trends: With tougher credit standards, many people who ordinarily might borrow from credit cards are willing to pledge future pension checks for cash now, even if the terms are highly unfavorable to them.

Many people who never previously considered unconventional investments are attracted to them with bonds paying ultralow yields and stock markets a highly risky bet.

The financial middlemen bundle information obtained by the websites into spreadsheets that are supplied to financial advisers for their clients. The investor pays an agreed-upon lump sum to the retiree, who signs a contract pledging to hand over all or part of each month's check for a set number of years. The deals typically are priced to yield investors 6% to 7% or so a year, as their money is returned over a period of several years to 10 years.

Meanwhile, an array of middlemen collect fees: They are spread among the website operators, firms that do the heavy lifting of pulling together transactions, distributors and the financial advisers who land individual investors.

No one keeps track of how many pensions are traded for instance cash, and the number for now is believed to be small. But in recent months, websites have proliferated, and middlemen far from Wall Street have ramped up efforts to win over financial advisers to the concept.

These firms have their eye on the hundreds of thousands of military veterans, police officers and firefighters who can start receiving pension checks while they are still in their 40s, many of whom have moved on to other jobs and wouldn't be put in desperate financial straits if they pledge some of their future pension income for a wad of cash.

The deals attempt to thread the needle of federal pension law and federal statutes governing military pay, which prohibit the "assignment" of qualified pensions. The transactions attempt to make the distinction that the pension itself isn't being assigned but that the retiree is promising to fulfill a contract and will use money he or she has received from a pension check.

But that makes the transactions risky to investors because the retiree could breach the contract or file for bankruptcy, putting investors in a line of creditors seeking to be repaid.

Pension-income-stream transactions arranged by a California firm that has been in the business since the 1990s have been enforced by some courts but rejected by others, including a U.S. bankruptcy court, filings show.

Source: WSJ

Read The Post Here: Re-Sale of Pension Income- Wall Street Journal

The stock market swings are just sickening- it's become so wild that you almost want to laugh, until you realize it's people's life savings in the death throes. Massive evaporation of wealth in an afternoon, followed by a roaring rally to bring us back to square one…

And while those 20% rallies in a few days do wonders for our portfolio balance, what does it do for the mind?   Is this the retirement you dream of? I bet it's not.

Most people nearing retirement envision a life of ease, with enough income to support their needs and to finally take it easy.  Now, if  you dream instead of revising your standard of living by 20-30% on a weekly basis, by all means stay in the equity markets.… 

This week (11/7/11) the Wall Street Journal has a fascinating roller coaster of a chart to consider-

Now this is hard to see, so I have a larger size image- just CLICK THE LINK HERE.

Look at the swings in value- a $100,000 portfolio on June 30th 2011, up to $101,846 by July 22… and down to $84,766 August 8th.  Come on.  It's just too much to bear.  Please- do yourself a favor and disregard the funds, ETF's and stocks my beloved Journal tacks on to the chart.  Find a refuge in something safe.

Some highlights of the article:

October's surge helped many mutual funds bounce back from recent lows. It was also a vivid reminder of what has become a fact of life for stock investors: It's crazy out there. And it seems to be getting crazier all the time.

If the market's roller-coaster ride has caused you a lot of heartburn, this might be a great time to do something about it, before another slide is just one too many.

One too many swings indeed. 

If you didn't learn your lesson before, learn it now: When your current stock exposure makes you queasy, take advantage of rallies to trim it back to a level—perhaps to around a third of your overall holdings—where you won't be tempted to bail out the next time the Dow Jones Industrial Average plummets 400 points.

The tortoise and hare fable teaches us that slow and steady win the race.  Mainstream media wants you to believe that buy and hold = slow and steady.  This is no longer true.

Retirees can not face a future where their net worth swings 10-20-30% in a few days, and their income therefore swings with the market.  Many plans and dreams are built and budgeted on income- plans like housing, trips, groceries, basic living costs. 

Can you stomach cutting your basic living costs by 30% because your stocks are down?  Skip Christmas for the grand-kids because your portfolio is down?

There is a better way to ensure your income.  It's not a '4% rule' or an allocation strategy or an ETF, or anything your stockbroker will talk to your about. 

This is an old line, but it's never been more true-

You insure your home, you insure your health, and you insure your life…. Why not insure your retirement??

Annuity Straight Talk is ready when your are to discuss your retirement income planning needs.

800-438-5121

Article Source: WSJ

Read The Post Here: Rest Easy in A Crazy Market

 

• America is still the leading manufacturer in the world, with 22 percent of global manufacturing primarily in advanced, capital intensive manufacturing. American manufacturing workers are eight times more productive than Chinese workers.

• The American economy is still three times the size of China’s, even though its population is about one-fifth its size.

• The market values of Exxon and Apple alone are greater than the market value of the entire Shanghai stock market. America’s multinationals are dominant, representing 47 of the world’s 100 largest companies by market value. Meanwhile, 15 of China’s 20 largest companies are owned and run by the Chinese state.

• America is the world’s third-largest exporter (just a hair behind China and Germany) and its upside potential is enormous. Only two percent of America’s small- and medium-sized businesses export at all right now.  About two-thirds of our trade deficit is due to Chinese and energy imports.

• America remains the world’s agricultural king, accounting for 20 percent of global trade. It has twice the arable land of China (25 percent desert) and its farms are the most productive in the world. By contrast, in India 60 percent of people are in agriculture, but the sector accounts for only 15 percent of GDP. About 40 percent of India’s crops spoil on the way to market due to poor infrastructure.

• The United States has 28 percent of the world’s coal reserves and Louisiana alone has four times the proven natural gas reserves of China.  The United States has twice the fresh water of China, while China’s annual carbon emissions are already twice that of America.

• America is still the No. 1 destination of foreign direct investment. On a cumulative basis, it has four times that of the U.K. and six times that of China.

• America continues to play its role as a global talent magnet. Fifty-two CEOs of S&P 500 companies and 72 CEOs of Inc. 500 companies are foreign born. About 30 percent of Silicon Valley start-ups were founded by immigrants. Let’s keep it going.

Bryan J. Anderson

Read The Post Here: Why I’m Bullish On America!

Far more people will retire without pensions and will need to rely on their accumulated savings to pay for everything that Social Security doesn’t cover.

So how will you turn those funds into the monthly income you will need to pay your bills? The answer is murky at best.

Previous generations built "ladders" of bonds with staggered maturities and invested in dividend-paying stocks, expecting to live solely on the returns. But low interest rates and a volatile market have made those strategies difficult

The article continues with good pointers and explores the pitfalls inherent in relying on any one strategy alone.  It should sound familiar to regular readers of Annuity Straight Talk.  Our pages on building your own Private Pension explore the  topic thoroughly.

The Lifetime Income Answer:

It doesn’t take extensive analysis by The Wall Street Journal to get to a Main Street common sense conclusion: In retirement, individuals need to convert their assets into income, and need it to last a lifetime.  And in to be in harmony with their risk tolerance, they should find as strong a guarantee as possible to absolutely, positively ensure that they can never run out of income.  That is a secure retirement. 

Turn that statement around for a second- if you are comfortable facing the chance of losing a significant portion of your assets in a stock market downturn, and possibly being forced to radically alter your standard of living to suit your diminished means, then by all means, stay invested in the markets. 

Hopefully, this illustrates that a more prudent strategy is to lock in enough income to guarantee your base standard of living.  Take care of housing, food, and cost of living with Social Security, annuities, and/or pensions- and then leave your remainder assets invested in the markets, real estate, or other endeavors.  That way, when the next market crash comes, you will have insulated yourself from the most dire consequences.

The Journal closes with this advice as well:

Ultimately, we may have to become as alert to retirement asset-allocation and withdrawal strategies as we have become at investing and accumulating. Depending on how much you save and how much you want to spend, you may find you want a mix of products and services.

A mix of products and services is definitely appropriate, and will vary for everyone.  No one size fits all.   Annuity Straight Talk stands ready to assist you in devising a lifetime income strategy suitable for your needs.  Give us a call at 800-438-5121.

Article Source

Read The Post Here: Funding The Post Pension Retirement- Wall Street Journal

50% of people age 45 and up have not calculated their savings needs

25% of people now 65 will live to age 96

62% of married couples disagree on when to retire.

These and other statistics in the article underscore the need to take control of your own destiny, plan for retirement properly, and take action on those to ensure that your goals become reality. 

The home is the first place to start- agreeing on goals, retirement location, and retirement financial needs is hard but essential groundwork.   We stand ready to assist with the financial side of the equation, but I'm afraid we can't help much with the personal issues

The article is here, and quoted below.

Stocks are volatile, the economy is stagnant, and corporate pensions and Social Security seem less viable by the day. One might expect such a dismal confluence of events to jolt aspiring retirees into financial-planning overdrive, furiously making budgets, cutting spending and salting away every spare nickel.

Yet many Americans are responding to the market and economic malaise by putting their heads in the proverbial sand. Half of U.S. workers who are at least 45 years old haven't even tried to calculate how much they will need to save to live comfortably in retirement, according to a March study by the Employee Benefit Research Institute.

Others are shelving retirement dreams because they are paralyzed by fear. According to EBRI, 20% of employees say they intend to retire later than they had planned, for reasons ranging from the slowing economy to worries over the future of Social Security.

Even wealthier people are nervous. Two-thirds of "affluent investors" with at least $250,000 in investable assets surveyed in June were concerned that their retirement stash won't last throughout their lifetimes, up from 57% in December, according to Bank of America Merrill Lynch.

"People are frozen because they don't know which way to go," says Jeannette Bajalia, president of Petros Estate & Retirement Planning in St. Augustine, Fla. "Anytime there's ambiguity, it immobilizes them."

The good news is that there are ways to fix derailed retirement plans. Among the essential tasks: talking honestly with your spouse, planning realistically for health-care expenses and rethinking your retirement age and Social Security assumptions.

The first step is looking beyond the current market realities of volatile stocks, low-yielding bonds and slow economic growth—and having the fortitude to continue taking measured risks.

Many investors are too rattled to invest in anything except cash these days. "There's a level of conservatism in couples in their 50s and 60s unlike anything I've seen," says Greg Sarian, a certified financial planner at Merrill Lynch for 19 years in Wayne, Pa. "Even if they already had a defensive investment posture, there's been more pullback."

Yet giving up potential growth on money meant to last the rest of your life can be risky as well. Say a couple with $2 million in savings, panicked over increasing market volatility, moves a portfolio of stocks, bonds and cash investments entirely to certificates of deposit and short-term Treasurys earning 0.5% a year and never shifts it back. Assuming they withdraw $120,000 in their first year of retirement and 3% more each year thereafter, they could run dry in about 14 years, says Michael Martin, president and chief investment officer of Financial Advantage in Columbia, Md.

For clients approaching retirement, Mr. Martin's firm puts 28% into equities, including 22% in individual stocks and 6% in three emerging-market mutual funds. A larger portion—36%—goes into six bond funds with a combined duration of less than three years and a 4% yield. Another 16% is in cash reserves, 13% in "hard assets" (10.5% in gold and 2.5% in timberland) and 7% in a tactical fund that jumps into asset classes as conditions warrant ( Pimco All Asset All Authority Fund).

This conservative allocation appeals to retirees who make portfolio withdrawals for living expenses, because their investments have some growth potential, but it also spreads risk enough to make it more likely that their nest eggs can last, Mr. Martin says.

So far this year, the portfolio has brought a 3% return, he says, compared with the average money-market and savings account return of 0.15%, according to Bankrate.com.

Saving strategies are only the beginning, however. Advisers say people should start thinking about other important matters, from where to live to Social Security expectations, in their 40s, if not sooner. Here's a guide.
 

• Start talking with your husband or wife—now.

Couples are having trouble connecting on retirement-planning issues. A May study by mutual fund giant Fidelity Investments found that 62% of couples approaching retirement disagreed about their expected retirement ages, and 47% disagreed on whether they will continue to work in retirement.

Scott Anderson took a buyout late last year at age 51 from his job as precinct deputy inspector of the Nassau County, N.Y., police force. He spent much of last winter helping his twins apply to colleges, he says, and working out an income plan with Craig Ferrantino, a financial adviser in Melville, N.Y.

"One person in the couple usually handles it," Mr. Ferrantino says, "but we have a holistic approach, and we like to talk to both people in the couple." By doing so, Mr. Ferrantino often finds that partners have different ideas about how much income they need, and how large an investment loss they could tolerate, among other potential conflicts.

Mr. Anderson's wife, who has a part-time job at a boutique, plans to work another 10 years—and isn't sold on his idea of moving to Utah for its world-class skiing. "If I'm going to move from my primary residence of the last 20-plus years, I see it coming sooner rather than later," he says.

The idea is bringing up issues, he says, because Ms. Anderson's mother lives near them on Long Island. As a way to compromise, he is starting to think about buying a beach house there.

Couples also can try taking a quiz together to see how they match up on basic expectations. Fidelity offers one at fidelity.com/couplesquiz that focuses mainly on finances, and there are others more focused on time at dontretirerewire.com/couples_quiz.html and zestnow.com (click on "Relationships").

A rule of thumb: Vow to spend at least half the time talking about your retirement plans together as you do about summer vacation plans, says Mr. Sarian of Merrill Lynch.

• If working till you drop is your plan, think again.

Half of baby boomers expect to be in their 70s before they fully retire, according to research released last year by First Command Financial Planning. But people laid off in their late 50s and early 60s, often because of their relatively large paychecks and benefit packages, have a hard time getting back to those levels.

"Anyone who is 55-plus working in corporate America has a bull's eye on their back," says Kevin Reardon, a fee-only financial adviser in Pewaukee, Wis. "We tell everyone who's not the owner of a business to prepare."

The unemployment rate for 55-plus workers was 6.6% in August—lower than the 9.1% rate for the total labor force. But since the start of the recession, both the number of unemployed and the unemployment rate have increased by a greater percentage for the over-55 age group, according to an AARP analysis. What's more, the average duration of unemployment for older job-seekers is a solid year, compared with 37 weeks for younger workers, the group says.

Of course, an economic rebound could change these trends. But few economists are predicting robust job creation in the next few years.

One potential salve is part-time work. Even a modest paycheck could help early retirees give their battered investments a chance to bounce back before they start tapping them.

Mr. Reardon, the Wisconsin planner, counseled one couple recently to have the wife hold on to her job three to four years longer than planned. She works part-time running a travel agency, making about $25,000 a year. She didn't view it as a large contribution to the couple's finances, so she considered quitting so they could move.

Mr. Reardon explained that if she kept working, their investments should last at least two additional years—until she's 84, rather than 82. She has continued—and can do most of the work in six months each year, he says.
 

• Plan for rising health-care costs—especially if you're healthy now.

Most boomers realize that care is pricey, but typically don't grasp the scale of rising costs.

A private room in a nursing home, which now costs $82,125 a year on average, according to the American Association for Long-Term Care Insurance, could escalate to $190,000 a year by 2030, according to estimates by insurer Sun Life Financial. Yet in a survey of 1,015 people who are 50 or older that Sun Life released earlier this month, the median guess was that costs would go up half that much.

Some 70% of Americans older than age 65 will need long-term care, meaning help with daily activities such as eating and bathing, according to the U.S. Department of Health and Human Services. Yet the same survey found that almost no one had discussed long-term care with a financial adviser or lawyer.

Financial planners who confront their older clients with such statistics say the clients usually spring for long-term-care insurance, which costs about $2,350 a year for a 55-year-old couple (including discounts for good health and being married), or $4,660 a year for a 65-year-old couple, according to the American Association for Long-Term Care Insurance.

The main moving parts are the length of the benefit, which generally should last at least three years; the daily benefit amount, which should match up to costs where you live; and the "elimination period," meaning the period of time you choose to pay your expenses yourself before coverage starts. Particularly for people under age 70, many planners also recommend paying up for a rider that provides a 5% bump in the benefit each year to protect against inflation.

Another option is a "hybrid"—an annuity or life-insurance policy with a long-term-care benefit. Ms. Bajalia in St. Augustine recently set up an indexed annuity for Barbara Deckman, a 62-year-old retired teacher, which has a lifetime-income benefit and a "double confinement" rider, meaning the policy pays twice as much each year if Ms. Deckman qualifies for long-term-care payments.
 

• Don't jump the gun on Social Security.

One of the benefits of advance planning is that it can allow you to delay taking Social Security for as long as possible. Depending on your financial situation, life expectancy and other issues, that could be a wise move.

Unless a person is terminally ill, there is little upside for someone in their early 60s to tap Social Security. By collecting at 62, rather than at the government's "full retirement age" of 66 for people born from 1943 to 1954, you would slash your monthly benefit. Wait until age 70, however, and you would get 132% of the monthly benefit you would collect at your full retirement age.

A retiree eligible for $18,750 a year in Social Security at age 62 who waits to collect $33,000 a year starting at age 70 could substantially increase the after-tax amount he could spend by age 95, according to T. Rowe Price. Assuming the benefit would increase 3% a year for inflation, and that the retiree was in the 25% marginal income-tax bracket, he would get $850,000 in all by starting the benefit at age 62—or $1.4 million by waiting until age 70.

Becoming a nonagenarian isn't unthinkable: One in four of today's 65-year-olds will live to 90, and one in 10 to age 95. So, if your family members typically live into their 80s or 90s, and you think you could, too, you should consider delaying the benefit as long as you can.

Of course, the big challenge in postponing Social Security is figuring out how to fill the gap between age 62 and whenever you start collecting benefits. Couples in which both spouses worked could try to live off the early benefit of the worker with the smaller paycheck, saving the larger one for later.

Another strategy, living off retirement-account withdrawals for a few years, might help cut future tax bills. Starting in their 70s, retirees generally have to take mandatory withdrawals from retirement accounts, and pretax contributions and earnings are subject to income tax. By lowering those account balances in their 60s, at the same time they aren't drawing Social Security income, they might be able to take smaller mandatory withdrawals later and also pay tax on those withdrawals at a lower rate.

Bottom line, Mr. Reardon says: "If there's a good chance one of you will live into your 80s, delaying Social Security is a good way to guarantee your rate of return for your collective lives."

If you wait until age 70 to begin collecting Social Security benefits, you will get 132% of the monthly benefit you would have collected at your full retirement age. An earlier version of this article said you would get 132% of the monthly benefit you would have collected at age 62.
 

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