Many may remember the movie “10,” where Dudley Moore was chasing Bo Derek who was the perfect “10” in the movie. When it comes to retirement investing, there is another perfect “10,” which is an indexed annuity. and all kidding aside, it is literally true.
To illustrate, there are 10 features that should be considered when making a critically important decision such as saving for retirement or increasing your retirement income if you are already there.
We will compare the following popular investment choices: annuities, CDs, money markets, municipal bonds, corporate bonds and mutual funds, and how they fare with each of the 10 categories, which are all fact-based.
1. Is the investment free from market risk and price fluctuations?
In this category, only the annuity and the CD qualify.
2. Are the interest earnings free from current taxes?
Only the annuity and the muni bond qualify.
3. Can the interest earnings be reinvested automatically with no current income taxes?
Only the annuity qualified.
4. Is the tax liability on Social Security income eliminated by deferred accumulation (buildup of account value)?
Again, only the annuity qualified.
5. Can you make small additional investments?
The annuity, money market and mutual fund passed the test.
6. Can you take penalty free withdrawals?
All of them qualify except for the CD.
7. Can you make systematic (periodic) withdrawals?
The annuity, CD and mutual fund qualify here.
8. Does the market have allowances for a nursing home or fatal illness (medical bailout)?
Once again, only the annuity qualifies.
9. Can you get a lifetime income you can’t outlive with tax advantages?
Again, only the annuity qualifies.
10. Can the investment be probated? (Probate is a legal process of validating a will for estate purposes. It can be costly and lengthy).
Only the annuity avoids probate.
The final score looks like this: CDs — 2; money market — 2; muni bonds — 2; corporate bonds —1; mutual funds — 3; and the annuity — 10.
Add on to the indexed annuity attractive bonuses up to 10% on the first day and the ability to follow the stock market indexes only when they are rising (no market risk) and you have the winning ticket. If all this wasn’t enough, these annuities have been proven to beat the market itself over time without the pitfalls. There simply is no other investment to compare them to.
Remember to honestly evaluate all of your finances with a skilled and knowledgeable professional who should be able to give you other money saving/making ideas without cost, risk or fees. To put it another way, you can make more money without the risk and other pitfalls and can sleep a whole lot better!
Howard S. Blanck is an independent senior financial advisor in Reading and a retired high school Social Studies teacher, as well as the author of “Easing the Economic Blues” and numerous other financial publications. His website is seniorresourcesfinancial.com.