Mayday, mayday: Retirement plans are in imminent danger

By Paul Cross

Annuity National Brokerage Co.

The biggest risk an investor faces is running out of money during retirement or going bust before retirement. And this at a time when the fastest growing age group is 100-plus. So, why are people transferring billions monthly into annuities?

One Gallup Poll survey cited safety as the number one reason. For many people, the number one reason is safety. For others, their number one reason is more growth, and for some, increased income is the primary reason. The fact that annuities can provide more income, more growth, and less tax is now documented by financial universities and economists around the globe.

Top 10 reasons people are transferring billions monthly into annuities:

10. Protect your money and make it immediately available to your beneficiaries. Your remainder in annuities is immediately available to your named beneficiaries in lump sum and/or in streams of income, as you elect.

9. Avoid probate. Your money in annuities can avoid the probate courts with proper beneficiary designations. You can avoid that long, painful, and costly time delay in probate courts, saving time, court costs, administrative costs, and legal fees.

8. Guarantees. The annuity provides many guarantees not available in other money contracts, including guaranteed income for life -- even to age 100 and beyond. The annuity not only guarantees the return of your money, it guarantees a return on your money.

7. Tax-favored income. A tax-favored income can provide a big boost in purchasing power. Special IRA rules let you ratably recover the cost basis (exclusion ratio); therefore, only a portion of the income is taxable over the guaranteed income period.

6. Develop an income with tax dollars. You can grow a tax-deferred annuity into a rather large sum of money and then start an interest income from the annuity. The income could continue for life, and during your life you will have never paid tax on the growth of the annuity that is providing the income. And your spouse, as the named beneficiary, can continue the interest income stream, while neither of you will have ever paid tax on the growth of the annuity that provided years of income. You can convert big tax balloon payments into streams of income for your family heirs with the annuity restricted designated beneficiary form.

You can grow a $100,000 tax-deferred annuity into $320,000 and receive an interest income for your life and your spouse's life span with a $2.6 million payout to your designated beneficiaries.

5. To reduce or eliminate income tax on Social Security income. The interest credited to annuities is not included in the provisional income calculation that triggers income-tax on social security incomes.

Interest credited to CDs, money markets, and even tax-free income from muni-bonds are included in the calculation that triggers income-tax on social security income.

Retirees are paying more than $60 billion annually in tax on social security incomes. Simple money transfers from bank accounts and money markets to annuities saves you income tax on credited interest and may save you tax on social security income.

4. Stop paying tax on interest accumulation. Many people who own bank accounts and money markets let the interest compound and grow. That means they are paying the income tax out of their own pocket. Simply transfer those accounts to annuities and the tax they were paying on earned interest now becomes money they can spend, save, or invest.

3. More income. University studies have now concluded that income annuities can provide an income for life at a cost as much as 40 percent less than a traditional mix of stocks, bonds, and cash.

Annuities provide you with two options: 1. Increase your income by 40 percent with income guaranteed for life, or 2. Transfer the 40 percent into a tax-deferred annuity, thereby enjoying income for life with continued growth on your money for increases in retirement income.

2. More growth. Albert Einstein said, "Compound interest is the eighth wonder of the world." It causes me to wonder what he would have had to say about compound tax-deferred interest. Perhaps he would have called it the ingenuity of annuities.

Compound tax-deferred growth is an automatic re-investment cash flow of tax dollars that are compounding and growing tax-deferred. Compared to bank accounts and money markets, annuities can provide 45 percent more growth in the first year, even if interest rates are only the same. And, the annuity has no down time.

1. Safety. Traditional tax-deferred annuities and fixed-indexed annuities, provide the greatest element of safety and growth. The Wharton School of Business, University of Pennsylvania, offers the first empirical exploration of fixed indexed annuity returns based upon actual contracts that were sold and actual interest that was credited. In the University report, "Real World Index Annuity Returns," the extraordinary compound growth is revealed with freedom from risk, fees, and other costs associated with stocks, bonds, and mutual funds.

Don't let stock market down time send you on a one-way trip to the poor house. You can have excellent growth and enjoy more income free of risk.

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