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Keith Miles Attorney-at-Law 2250 Oak Road PO Box 430 Snellville, GA 30078 678-666-0618 mileslawoffice@gmail.com www.TimeToEstatePlan.com
Many financial professionals suggest that you'll need about 70% of your current annual income to fund your retirement.
(www.ssa.gov). Additional sources of retirement income may include a 401(k) or other retirement plan, IRAs, annuities, and other investments. The amount of income you receive from those sources will depend on the amount you invest, the rate of investment return, and other factors. Finally, if you plan to work during retirement, your job earnings will be another source of income.
The longer your retirement, the more years of income you'll need to fund it.
become too focused on day-to-day returns. Instead, keep your eyes on your long-term investing goals and your overall portfolio. Although only you can decide how much investment risk you can handle, if you still have years to invest, don't overestimate the effect of short-term price fluctuations on your portfolio.
averaging, you don't try to "time the market" by buying shares at the moment when the price is lowest. In fact, you don't worry about price at all. Instead, you invest a specific amount of money at regular intervals over time. When the price is higher, your investment dollars buy fewer shares of stock, but when the price is lower, the same dollar amount will buy you more shares. Although dollar cost averaging can't guarantee you a profit or protect against a loss, a regular fixed dollar investment may result in a lower average price per share over time, assuming you invest through all types of markets. Please remember that since dollar-cost averaging involves continuous investment in securities regardless of fluctuating price levels of such securities, you should consider your financial and emotional ability to continue purchases through periods of low price levels.
Asset Allocation
Asset allocation is a common strategy that you can use to construct an investment portfolio. Asset allocation isn't about picking individual securities. Instead, you focus on broad categories of investments, mixing them together in the right proportion to match your financial goals, the amount of time you have to invest, and your tolerance for risk. regular income from your investments. Cash alternatives: Cash alternatives (or short-term instruments) offer a lower potential for growth than other types of assets but are the least volatile. They are subject to inflation risk, the chance that returns won't outpace rising prices. They provide easier access to funds than longer-term investments, and may be appropriate if your investment goals are short-term. Not only can you diversify across asset classes by purchasing stocks, bonds, and cash alternatives, you can also diversify within a single asset class. For example, when investing in stocks, you can choose to invest in large companies that tend to be less risky than small companies. Or, you could choose to divide your investment dollars according to investment style, investing for growth or for value. Though the investment possibilities are limitless, your objective is always the same: to diversify by choosing complementary investments that balance risk and reward within your portfolio.
Asset allocation isn't about picking individual securities. Instead, you focus on broad categories of investments, mixing them together in the right proportion to match your financial goals, the amount of time you have to invest, and your tolerance for risk.
You surrender the annuity and receive a lump-sum payment of all of the money you have accumulated. You receive payments from the annuity over a specific number of years, typically between 5 and 20. If you die before this "period certain" is up, your beneficiary will receive the remaining payments. You receive payments from the annuity for your entire lifetime. You can't outlive the payments (no matter how long you live), but there will typically be no survivor payments after you die. You combine a lifetime annuity with a period certain annuity. This means that you receive payments for the longer of your lifetime or the time period chosen. Again, if you die before the period certain is up, your beneficiary will receive the remaining payments. You elect a joint and survivor annuity so that payments last for the combined life of you and another person, usually your spouse. When one of you dies, the survivor receives payments for the rest of his or her life. When you surrender the annuity for a lump sum, your tax bill on the investment earnings will be due all in one year. The other options on this list provide you with a guaranteed stream of income. They're known as annuitization options because you've elected to spread payments over a period of years. Part of each payment is a return of your principal investment. The other part is taxable
investment earnings. You typically receive payments at regular intervals throughout the year (usually monthly, but sometimes quarterly or yearly). The amount of each payment depends on the amount of your principal investment, the particular type of annuity, the length of the payout period, and other factors.
You may be subject to a 10 percent federal penalty tax (in addition to any regular income tax) on any earnings you withdraw from an annuity before age 59, unless you meet one of the exceptions to this rule. Investment gains are taxed at ordinary income tax rates, not at capital gains rate.
An annuity can often be a great addition to your retirement portfolio. Here are some reasons to consider investing in an annuity: Your investment earnings are tax deferred as long as they remain in the annuity. You don't pay income tax on those earnings until they are paid out to you. An annuity is free from the claims of your creditors in most states. If you die with an annuity, the accumulated value will pass to your beneficiary without having to go through probate. Your annuity can be a reliable source of retirement income, and you have some freedom to decide how you'll receive that income. You don't have to meet income tests or other criteria to invest in an annuity. You're not subject to an annual contribution limit, unlike IRAs and employer-sponsored plans. You can contribute as much or as little as you like in any given year, subject to the annuity contract provisions. You're not required to start taking distributions from an annuity at age 70 (the required minimum distribution age for traditional IRAs and employer-sponsored plans). You can typically postpone payments until you need the income. But annuities aren't for everyone. Here are some potential drawbacks: Contributions to nonqualified annuities are made with after-tax dollars and are not tax deductible. Once you've elected to annuitize payments, you usually can't change them, but there are some exceptions. You can take your money from an annuity before you start receiving payments, but your annuity issuer may impose a surrender charge if you withdraw your money within a certain number of years (e.g., seven) after your original investment. You may have to pay other costs when you invest in an annuity (e.g., annual fees, investment management fees, insurance expenses).
annuity issuer.
Shop around
It pays to shop around for the right annuity. In fact, doing a little homework could save you hundreds of dollars a year or more. Why? Rates of return and costs can vary widely
between different annuities. You'll also want to shop around for a reputable, financially sound annuity issuer. There are firms that make a business of rating insurance companies based on their financial strength, investment performance, and other factors. Consider checking out these ratings.
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Unless the immediate annuity is purchased with the proceeds from a deferred annuity.
A Section 1035 exchange into another insurance product may result in new or increased surrender charges or higher charges, such as annual fees, associated with the new product. Features and benefits of the new product may result in higher costs associated with them and may not be necessary.
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Unless fixed account option is available and elected Guarantees subject to the claims-paying ability of the annuity issuer
Note: Variable annuities are sold by prospectus. You should consider the investment objectives, risk, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the variable annuity, can be obtained from the insurance company issuing the variable annuity or from your financial professional. You should read the prospectus carefully before you invest.
Page 8 of 11, see disclaimer on final page
A note about variable annuities Variable annuities are sold by prospectus. You should consider the investment objectives, risk, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the variable annuity, can be obtained from the insurance company issuing the variable annuity or from your financial professional. You should read the prospectus carefully before you invest. *All guarantees are subject to the claims-paying ability of the issuing company.
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In the accumulation phase, you (the annuity owner) send your premium payment(s) (all at once or over time) to the annuity issuer. These payments are made with after-tax funds, and you may invest an unlimited amount. You may choose how to allocate your premium payment(s) among the various investments offered by the issuer. These investment choices, often called subaccounts, typically invest directly in mutual funds. Generally, you can also transfer funds among investments without paying tax on investment income and gains. The issuer may collect fees to manage your annuity account. These may include an annual administration fee, underlying fund fees and expenses which include an investment advisory fee, and a mortality and expense risk charge. If you withdraw money in the early years of your annuity, you may also have to pay the issuer a surrender fee. The earnings in your subaccounts grow tax deferred; you won't be taxed on any earnings until you begin withdrawing funds or begin taking annuitization payments. With the exception of a fixed account option where a guaranteed* minimum rate of interest applies, the issuer of a variable annuity generally doesn't guarantee any return on the subaccounts you choose. While you might experience substantial growth in your investments, your choices could also perform poorly, and you could lose money. Your annuity contract may contain provisions for a guaranteed* death benefit or other payout upon the death of the annuitant. (As the annuity owner, you're most often also the annuitant, although you don't have to be.) Just as you may choose how to allocate your premiums among the subaccount options available, you may also select the subaccounts from which you'll take the funds if you decide to withdraw money from your annuity. If you make a withdrawal from your annuity before you reach age 59, you'll not only have to pay tax (at your ordinary income tax rate) on the earnings portion of the withdrawal, but you may also have to pay a 10 percent premature distribution tax. After age 59, you may make withdrawals from your annuity proceeds without incurring any premature distribution tax. Since annuities have no minimum distribution requirements, you don't have to make any withdrawals. You can let the account continue to grow tax deferred for an indefinite period. However, your annuity contract may specify an age at which you must begin taking income payments.
*All guarantees are subject to the claims-paying ability of the issuing company.
10. To obtain a guaranteed income stream* for life or for a certain number of years, you can annuitize which means exchanging the annuity's cash value for a series of periodic income payments. The amount of these payments will depend on a number of factors including the cash value of your account at the time of annuitization, the age(s) and gender(s) of the annuitant(s), and the payout option chosen. Usually, you can't change the payments once you've begun receiving them. 11. You'll have to pay taxes (at your ordinary income tax rate) on the earnings portion of any withdrawals or annuitization payments you receive.
Law Office Of Keith R Miles, LLC Keith Miles Attorney-at-Law 2250 Oak Road PO Box 430 Snellville, GA 30078 mileslawoffice@gmail.com 678-666-0618
Page 11 of 11 January 30, 2014 Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2014