Retirement planning is about mixing life policies, annuities, and possibly other options to provide for a person’s retirement income. The best time to start planning this is in your early to mid forties for a good retirement plan.
The first thing we look at is your social security income and what it is expected to be. This is generally $1250-$2500 for the primary and about half for the spouse if the spouse draws of the primary.
The next is any 401k, Simple, or IRA that you have already got. These can be also used to help fund other forms of retirement planning on a 1035 exchange. These options are highly tied to the stock market so when the market is up the member is happy, when the market goes down then the member loses and is very unhappy.
The next for of retirement is actual life policies in the form of the various Universal Life Policies:
Universal Life is a policy that is permanent and earns a little bit more interest than whole life, usually around 4.5-6%. These are the start of the good retirement vehicles although with this policy it can be said to be questionable as to whether it is or not. This policy pays the death benefit and the cash value to the beneficiary. These policies can also have living benefits.
Guaranteed Universal Life Is the next Permanent life and it earns about 6% interest and can be an okay retirement policy. This policy pays the death benefit and the cash value to the beneficiary. These policies can also have living benefits.
Variable Universal Life is the next. This kind of Life policy is loaded in fees and has at least a portion of the premium invested in mutual funds/stock market. Because of this these policies if not watched closely and carefully can lapse to a declining market. They also in a positive market have the best growth potential. They pay both the cash value and the death benefit to the beneficiary. These policies can also have living benefits.
Indexed Universal Life policies when structured right will give you a share in the up-side of the stock market without the downside. These can earn between 0%-13% in interest on average although it can usually is about 6% on average. These are the best retirement vehicles out there besides annuities especially when structured right. They pay both the cash value and the death benefit to the beneficiary. These policies can also have living benefits.
The next is annuities. These can be structured to leave a legacy, or to provide lifetime Income. They can be loaded in fees or have little to no fees.
Immediate annuities you put the money in and within 30 days start to receive income. Depending on how it is structured it can be lifetime or long going income or be a onetime lumpsum.
Fixed Annuities are a kind of annuity that is the first of the actual deferred. The way it works is you either make a large lumpsum payment in, or make smaller payments monthly, quarterly, semiannually, or annually. The money goes in and earns between 2%-5% on average. Again when they pay out they can pay a lumpsum, or pay little along.
An Indexed Annuity uses the stock market without the risk of the stock market. These plans can gain up to 13% in Interest and when the market goes south you lose nothing. When you collect you can get a lump sum or ongoing payments.
Variable annuities are loaded in fees and heavily tied to the stock market like Variable Universal Life Policies. These are great when you are young but when you hit your forties and fifties these become a worry as your initial investment and the interest earned in these policies are at risk. Also, all the fees are assessed at each year no matter whether it makes money or not.
If you place the lifetime rider then there is a small fee, but this assures you to have lifetime payments even if you outlive the cash value. This rider can be added on to any of these annuities generally if the company offers it but it is up to the company to offer it. This rider is not needed if you are not planning to use the annuity for living expenses but instead for leaving a legacy. There is also the ability to have these pay both husband and then wife and then if there is cash left in the cash value after both of these have passed pay that to the beneficiary.