Resolve to Protect Your Nest Egg: Make Your Retirement Money Outlive You
An Annapolis retirement planner sets out on a mission
By Desiree Smith-Daughety
Will you outlive your retirement money?
According to Rod Borowy, CEO of The Retirement Planning Center in Annapolis, that’s the number one fear held by people in retirement. Borowy says that 72 percent of retirees are more afraid of running out of retirement money than they are of dying.
Borowy has 35 years experience helping his clients safely plan a secure retirement income. He is a nationally recognized expert in retirement income distribution planning. “I specialize in all aspects of retirement planning. As a registered retirement consultant, certified senior advisor, certified insurance counselor, and one of Ed Slott’s ‘Elite IRA Advisors,’ I show my clients ways to protect their retirement money.”
This includes estate planning — and making sure your heirs get what’s left. “People have a real beef about leaving an inheritance to Uncle Sam.” Borowy has served two terms as chairman of consumer education for the Baltimore Life Underwriters Association.
If you’ve been putting off getting your retirement planning reviewed-or even launched-it may be time to add some investment resolutions to your perennial favorites. The beginning of the New Year is a great time to get on track, and retirement planning can literally pay you in quantifiable dividends starting today.
“If you’re 65 today and in good health, chances are you’ll live into your 90’s. There is more to plan for as a result of our living longer,” says Borowy. “Many of my clients are concerned with how to keep pace with inflation, market volatility, and whether taxes could eat away at their retirement dollars. Things like cost of living adjustments to keep pace with inflation need to be taken into account.”
Plan to Succeed Later in Life
Borowy’s mission is to both prepare his clients for, and guide them through their retirement years, handling such details as the planning of income distribution, tax benefits and deferrals, and the general security of their nest egg. “Diversification is so important. I would rather see a small gain and know that my client’s money is safe, then to promise a large gain and wind up losing value.”
Borowy, along with his wife Toni, host retirement planning-related radio programs on 105.7 FM The Fan on Saturdays from 7 to 7:30 a.m., and 1430 AM WNAV on Sundays from 9:30 to 10 a.m., as well as host retirement planning seminars around the Bay area. (For seminar locations and dates, go to http://saferetirementsolutions.com).
“I’ve seen some changes in planning behavior over the past few years. Some people have lost a significant chunk of their portfolio; so now they are a lot more conservative—and diversified. And as a fully independent planner, I don’t report to a board of directors, I only report to my clients. I also have the freedom to pick and choose from dozens of companies to invest with to make sure my clients’ portfolios remains diversified.”
Keeping our Plans on Track
Borowy requires that his clients come into the office once every six months for face to face consultations. “Of course, they can come in for a consultation as often as they like, but the six month review is critical because things can change and sometimes we need to make adjustments,” says Borowy.
Income planning is so important in retirement: “I never have anyone say, “I’m spending less now than I thought I would’!” Borowy stands by one old adage-with a twist: “A failure to plan is a plan to fail-especially with retirement. If you feel like you’re lost in the woods with your investments, come in and talk to us.” Borowy offers an initial one-hour complementary consultation.
If you don’t have a financial plan, or even if you do, ask yourself, “What are my investing or financial resolutions for this new year?” TOTB
For more information on The Retirement Planning Center and its services, call 410.266.1120 (Toll Free 877.268.4086), email firstname.lastname@example.org, visit http://saferetirementsolutions.com/ or stop by 1997 Annapolis Exchange Parkway, Suite 300, Annapolis, 21401.
Annuities will Guarantee a Safe and Secure Retirement Plan
The number one financial fear of retirees today is that of outliving their retirement savings. Yet many of the retirees that I often meet with still have the bulk of their savings in some type of equity account. Whether its mutual funds, small cap, mid cap, large cap, international, specific sectors, bonds or variable annuities, they're all securities and they're all subject to market fluctuation.
Unfortunately, I have met many retirees, who have lost a major portion of their retirement savings, over the past year, especially with the downturn in the stock market. The facts are that they will most likely never recoup these losses. They can, however, prevent their savings from losing any more money and continue to gain money at a guaranteed and competitive interest rate of return for as long as they live.
What I’m referring to are “Fixed and Indexed Annuities.” These are not to be confused with variable annuities where the account value goes up and down depending on the stock market performance and usually has ongoing annual fees, loads or charges.
Fixed and Indexed Annuities, on the other hand, can only go up in value and never down. You can choose a fixed competitive interest rate currently at 3.5% to 5.5% depending on the policy or choose to index your account to a stock market account.
I would not recommend a
variable annunity to a retiree,
especially now with the current
uncertain financial market conditions.
By indexing the account, it can grow based on the upside of stock market performance while not actually investing in the stock market. There are several different funds to choose from such as the S&P-500 Fund, Russell Fund, Dow-100 or a combination of the different funds and part at a fixed interest rate.
They really are very flexible. You can get market-like performance but your interest rate will have a cap, which will vary and is currently around 7% per year. So if the market goes up 10% you only get 7%, but if the market goes down you stay even. The life insurance companies assume all the risk so they put a cap on the gains. In the current uncertain economic market, that's a pretty good trade off.
I really like indexed annunities
when the stock markets are down.
An annuity in the account will pay a lifetime income either monthly or annually based on the amount of money in the account. If the annuity is set up properly, it will provide an income that can never be outlived. An individual or a joint annuity are both available. You can also guarantee payments to a beneficiary.
Fixed and Indexed Annuities guarantee no loss of principal in the event of premature death and also guarantee no loss of interest earned on the account. The interest accumulates on a tax deferred basis even with a non-qualified account — so an annuity can accumulate within a shelter.
Also keep in mind that the proceeds of an annuity, upon death, go to the beneficiaries probate free, outside of the will or trust, thus avoiding unnecessary court battles, legal fees, and costly delays in settling the estate.
In many states the proceeds from life insurance and annuity policies are exempt from the claims of creditors. This is true even on non-qualified accounts which, is something not found in a basic bank CD, money market account, or stock fund.
This is all subject to each state’s individual laws. The two states that I practice in, Maryland and Florida, both offer exemptions from creditors claims. Two excellent examples of how to shield your money from creditors in annuities are O.J. Simpson and Kenneth Lay “the former Enron chairman” who both purchased very large annuities.
Fixed and Indexed Annuities are offered
only by life insurance companies and
backed by these companies, the strongest
financial institutions in the world.
I have recently had people ask me “How do I know that my money is safe with a life insurance company?” and “What about AIG? They’re an insurance company, right?” Let me answer both of these questions, separately. Did you know that during “The Great Depression,” when brokerage houses went bankrupt and banks went under not one life insurance company defaulted on a payment?
Trivia Question: Who offered the world’s
first recorded annuities? See Below
Insurance companies are the soundest financial institutions in the world and have several ways that guarantee your money. A life insurance company is required by the Legal Reserve System to have reserves set aside to match “Dollar for Dollar” the amount of their liabilities. Because of these reserves, the annuities that these life insurance companies offer are given tax advantages that are not available with any other financial institution. No bank or stock market account can offer you these advantages.
The average ratio of the 25 largest life insurance companies in North America is $1.05 in assets for every $1.00 in liabilities. Insurance companies are also backed by the governing state guarantee funds against financial insolvency. Life insurance companies also buy reinsurance for the risks of both premature death and extended longevity. They have strict regulatory investment practices and are bound by the manner in which they invest by capital reserve ratios and they have holding companies.
Well, what about AIG? As a matter of fact, all of AIG’s insurance subsidiaries were always financially sound. AIG, the parent company, as a holding company, is a separate, federally regulated legal entity and is distinct and apart from its insurance subsidiary companies. Before these cash rich subsidiaries could even lend money to the parent company the transactions must be approved by the presiding state insurance commissioners.
“I’m more interested in the return of my
money than the return on my money.”
— Will Rogers
The point is that not only have life insurance companies weathered “The Great Depression,” they continue to be as rock solid as ever.
Did you know that if you have a pension plan, it’s usually administered by a life insurance company that provides a lifetime payout annuity?
If you win the lottery your payments are made through an annuity. There are no ongoing costs once you purchase a fixed or indexed annuity contract.
There are no annual fees, loads or ongoing charges of any kind. The only additional cost that could be incurred would be if you terminate the contract prematurely then you would have to pay a surrender charge to the company. This is a decreasing charge that lasts for a specified period of time depending on the type of policy.
If you think this appears too good to be true, you’ll be glad to know that these annuities have been around for a very long time. And like the companies that offer them, they’ll be here for a long time to come.
Trivia Answer: Domitius Ulpians is credited
with being the world’s fist annuity dealer
in Ancient Rome, circa 211 A.D.
Rod Borowy, CIC, RFC® has served two terms as Chairman of Consumer Education for the Baltimore Life Underwriters Association; helping to educate the general public and provide them with the information necessary to make wise and informed financial decisions about their insurance coverage. He has also been very active on the IIABA serving on their Agents Advisory Council helping to set agency standards, build company policies and establish better communication between insurance agents, the insurance companies they represent, and the general public who use their products.