The sad fact is that more than half of Americans fail to prepare for retirement. They don’t save enough, and end up almost entirely dependent upon Social Security after retirement.

Then they spend through their savings and have nothing left, living on just a fixed income.

It’s a rough situation. You see it all the time – seniors who need to go back to work while in their 70’s, just to make ends meet.

The good news is that there are resources to help Americans create and protect their retirement funds.

 

Step #1 is awareness.

In 2010, the National Association for Fixed Annuities (NAFA) designated June as National Annuity Awareness Month (NAAM) to help educate Americans on the important role of annuities as part of a secure retirement savings plan. In 2014, with a common desire to serve consumers by helping them understand annuity products, NAFA and several other industry associations came together to establish the Coalition for Annuity Awareness.

Creating National Annuity Awareness Month started the conversation. But that’s all it did. Annuities and retirement remained confusing, and the average American still didn’t have an unbiased source to turn to.

That’s where AnnuRetirement came into the picture.

 

AnnuRetirement

In 2015, the Coalition for Annuity Awareness launched AnnuRetirement, an impartial, informative website consisting of positive and accurate messages regarding the features and benefits of annuities available free to the public. As the official home of NAAM, this website serves as a foundation for the event’s mission.

Now, American consumers have an impartial, informative website that’s available for free. Educate yourself, so that when you speak with financial companies and agents, you understand what’s happening.

 

Why is this important?

It’s easy to run out of money in retirement. Especially when 51% of Americans have less than $50,000 in retirement savings at the time of retirement.

Currently, there is approximately $430 billion of in-force premium serving roughly 4.2 million Americans. More than nine in 10 consumers believe guaranteed lifetime income is an appealing characteristic of annuities[1] and 72 percent of retirees receiving income from an annuity were satisfied with their investment[2]. In 2017, life insurance companies paid $82 billion in annuity benefit payments providing crucial retirement security to contract holders[3]. In addition, more than 90 million Americans rely on annuities and other insurance products for financial and retirement security, and nearly 16 percent of Americans’ long-term savings is in life insurance and annuities.

[1] It’s All About Income: Inaugural Study on the American Retirement Experience, Insured Retirement Institute, 2016
[2] The Language of Retirement: Advisor and Consumer Attitudes Toward Income in Retirement, Insured Retirement Institute and Jackson, 2017
[3] Life Insurers and Your State, The American Council of Life Insurers (ACLI), 2018

Image Source: Employee Benefit Research Institute 2019 Retirement Confidence Survey, issued April 2019.

Does Medicare Cover Travel Abroad?

The Center for Medicare Services (CMS) has this to say about travel:

Medicare usually doesn’t cover health care while you’re traveling outside the u.s. There are some exceptions, including some cases where Medicare Part B (Medical Insurance) may pay for services that you get on board a ship within the territorial waters adjoining the land areas of the U.S.

Medicare drug plans don’t cover prescription drugs you buy outside the U.S.

 

So where can I find travel insurance?

We at the Rhoads Agency don’t focus on international insurance plans, but we do offer them. They are so versatile and affordable, that we think that everyone should have one when abroad. We work with International Medical Group (IMG) plans, that cover evacuations and medical care. Their plans also help ease trip cancellations and lost luggage.

There are plans for business travelers, globe-trotting seniors, missionaries, marine crew, and exchange students, as well as foreign nationals visiting the U.S. And plans can be customized to last anywhere from 5 days to 2 years, depending on your plans.

If you’re a retiree looking to visit Europe, go on a cruise, or have other international plans, give us a call!

 

How do IUL’s stack up? It’s time for an IRA vs IUL | Reading showdown!

Most people planning for retirement believe that 401(k) and IRA plans are the best strategies for retirement. I get it, they’re popular. But in the last 20 years, we had two major market crashes. Understandably, many working professionals worry about the long-term safety of their money. But with its contribution limits, costly tax implications, and investment options’ exposure to market risk, the IRA can be unseemly for careful savers.

I’ve spoken about Indexed Universal Life (IUL) plans as an alternative to Roth IRA’s in particular however, and how they’re competitive.

But how good or bad an alternative is an IUL, versus an IRA? The answer is, of course, it depends. No one can say for sure, because no one can tell the future of how the market and investments will fare.

I can, however, base projections off of current rates, using myself as an example. Some parameters:

  1. I’m a 40 year old male in relatively good health. For the IUL, I’d expect to get a Preferred Non-Tobacco rating (the second-best rating, not the best).
  2. I’m starting with zero invested in either today, and adding $500/month from now until age 69.
  3. I’m using the current interest rate on a typical IUL product, now at 8.26% EOY. There are no fund management fees.
  4. I’m using an optimistic 7.0% rate of return on a IRA, but subtracting 0.5% for fund management fees.
  5. I’m assuming that markets are steady and not fluctuating, because chaos is hard to model.
  6. And, I’m assuming that taxes will stay at their current rate for someone with an annual income of 100k/year.

Lots of assumptions there, but let’s see where that gets me.

 

IRA vs IUL | Reading: The Results

IUL: $500,579. No taxes taken out, because it’s paid for with after-tax dollars.

IRA before taxes: $630,000. After taxes (25% bracket): $472,500

Those taxes really hurt!

 

Some thoughts to consider:

Taxes: Given current federal fiscal deficits, do you think income taxes are staying where they are or going up?

Early withdrawals: If something happens to me and I need the cash value of the IRA before retirement, I’d pay large tax penalties from the IRA. No penalty for early withdrawals from an IUL.

Probate: If I were to die young with an IRA, my investment would probably be stuck in probate.

Life Insurance: If I were to die young with an IUL, my family would get the death benefit almost immediately. My death benefit at this level would start at $411,000, and go up steadily as I approach my golden years.

 

Reading Roth IRA Alternative | High earners have options for saving for retirement, but income limits mean direct contributions to Roth IRAs generally aren’t among them. This is unfortunate because Roth IRAs offer tax-free earnings growth and withdrawals in retirement — a strong advantage in an economic climate where income tax rates are likely to increase in coming years.

That doesn’t mean you don’t have other options for making your retirement savings plan more tax efficient.

What is a good Reading Roth IRA alternative?

There are very few ways to get tax-free income at retirement. If you’re looking for a Reading Roth IRA alternative, another way is municipal bonds, but you run the risk of losing your money or you’ll get low returns. An excellent way to receive tax-free income is through a policy loan on a life insurance policy, specifically an Indexed Universal Life insurance policy offered by National Agents Alliance.

What is Indexed Universal Life Insurance?

Indexed Universal Life insurance is a permanent life insurance policy that has a “living” benefit in the form of a cash value, in addition to a death benefit that is paid at death. The cash value in your policy earns interest based on either a fixed interest rate, an interest rate that is based on the increase in an equity or bond index or a combination of both. What makes Indexed Universal Life insurance unique is the ability to earn interest based on the movement of an external index (like the S&P 500®). With indexed based interest, you are likely to earn higher interest over time than with a fixed interest rate.

Indexed Universal Life insurance is a great tool for retirement savings because you are able to take advantage of a portion of the gains in the market when an index rises without having to take any of the risk when an index decreases. In other words, your money is at NO market risk! If the index goes down in any given year, you are guaranteed that your cash value will not decrease due to that market loss.

Not only are you able to save money for retirement through the cash value in your Indexed Universal Life insurance policy, if you were to die prematurely, your loved ones will receive the death benefit of the insurance policy federal income tax free. This is where an IUL really is a great Roth IRA alternative. You don’t even have to go through probate.

Why is Tax-Free Retirement using Indexed Universal Life insurance so important?

You can access the money in your cash value through policy loans & that income is federal income tax free! As mentioned earlier, life insurance is one of the very few ways to get access to your money tax free. And, the policy loan (and loan interest, if any) does not have to be paid back as long as the policy remains in force! If the policy loan is not repaid, any unpaid loan balance will be deducted from the death benefit & the remaining death benefit will be paid to your beneficiary when you pass away.

And let’s face it, income tax rates are likely to increase in the future. You can also protect your retirement income savings from decreasing due to potential future income tax rate increases. You don’t have to worry about future income tax rates because your income will be tax-free!