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Safe money options add stability, flexibility, and peace of mind

Three alternatives to bank rates & bond exposure

Times like these can certainly make planning more difficult.  Some clients have more fear than others and may do better if they raise their safety net.  We will look at Nelly a 60-year-old widow with a $1.5 million net worth.  She has been hoarding cash but is certainly wishing she could earn more than bank rates. We examine three options for Nelly to consider as an alternative to bank rates or bond exposures. 

Protect the principal and decide later 

Some clients prefer to keep some of their assets in safe investments that cannot lose principal especially as they get closer to retirement.  Nelly is not sure if she will retire at sixty-five and she is not sure she will want to annuitize any of her assets, so for now she just wants to grow her money without stock/bond market risks.  She will decide what to do for the long hall down the line.  The recommendation here is to put $200,000 into a deferred indexed annuity.  It is guaranteed to generate a 1% minimum return if the markets never reach a positive in the next 5 years.  In 5 years, she can decide to keep the annuity growing or initiate a partial/full annuitization to increase her guaranteed lifetime income. 

Recommendation:  Keystone 5 annuity from Reliance Standard

We have had nervous Nelly’s in the past and our Client Chronicle™ looks at a real-life story where Nelly decided to annuitize the income after she fully retires.  Launch the following link to learn more:  Client Chronicles™ – Protect, Guarantee and Decide Later.

Protect and tap later

Some clients are not sure when they will retire and exactly how much income they will need when they do.  They want to have some safe money, but they also want to be able to turn it into an income stream when they are ready.  In this case we recommend a deferred indexed annuity with an income rider.  The income rider base is guaranteed to grow and thus if she waits longer, she will have a higher lifetime withdrawal amount. 

Recommendation:  Protective Guaranteed Income indexed annuity with guaranteed income benefit

In Nelly’s case if she deposits $200,000 at age 60, she will receive:

$15,390 per year starting at age 65
$22,500 per year starting at age 70
$27,500 per year starting at age 75

If she doesn’t need the money for living expenses, she could tap the income later if she needed care.  If she thinks she will never use this part of her assets as income, she could remove the rider to increase the growth potential. 

Protect if things go wrong

Nelly looks to be in for a comfortable retirement, but she is concerned about outliving her assets.  This can happen if she lives long and her assets are depleted either from unfavorable returns or extra expenses.  In this situation, Nelly could decide to purchase a longevity annuity now.  For a single premium of $100,000 she guarantees a lifetime income of $34,000 starting at age 85.

The alternative is to purchase a life hybrid long-term care insurance plan with $100,000. This allows her to leverage her assets and protect a larger portion of them from long-term care expenses.  If she purchased an indemnity plan, it empowers her to create a care regimen which could include children or unskilled workers. 

Recommendation:  A hybrid long-term care plan from Securian Financial

If Nelly deposits $100,000 she will receive:

$66,000 for 6 years at age 70
$89,000 for 6 years at age 80
$119,000 for 6 years at age 90

If she never needs care, the plan will return the $100,000 to her heirs as a tax-free death benefit.  If at any time she needs this money back she has full access after 5 years.

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