If you are a baby boomer, then you are no stranger to the term “retirement crisis”. With healthcare costs on the rise and people living longer than previous generations, retirees are spending more and more money these days. Now factor in the uncertainty of the Social Security program and the fact that 10,000 boomers turn 65 each day, and I’d say you have a crisis on your hands. Let’s not forget to also mention the depletion of assets in 401(k) and IRA’s within the last five years due to market conditions. Baby boomers are scared, and they have every right to be!
Traditionally as someone gets closer to retirement, they’ll shift more and more of their assets towards something safe, like a CD for example. The problem with that train of thought is that we are historically at one of the lowest interest rate environments ever. The national average for a five year CD is only 1.5%! Baby boomers don’t just need growth on their assets; they also need safety and protection.
The good news is that insurance carriers are launching products that will help boomers in this crisis, and ultimately get them to and through retirement. One product in particular is the index annuity with an optional income rider. The income rider will provide a lifetime guaranteed income stream for an individual, and can also include your spouse. Based on how much is funded, the insurance carrier will guarantee a certain amount of growth, for income purposes. An individual’s age is what determines the payout percentage on that income amount. This is a way an individual can forecast predictable income for the rest of their life! In a way, it’s very similar to how pension plans work. So this can be looked at, and treated as your private pension plan. 401(k) money can be rolled over into these types of products, and so can IRA’s. Almost every insurance carrier these days has a product that will guarantee lifetime income. It’s important to not only do your research, but to also consult a local retirement income specialist.
Besides the lifetime income riders, more and more insurance carriers are offering short term traditional fixed annuities for safe money options. Baby boomers that are looking for something very similar to a CD would be interested in these types of products. These products will offer a guaranteed rate of return for a certain amount of years. Where the average on a five year CD is 1.5%, you’re looking at the average on a five year traditional fixed annuity being 2.75%. This is also something that has become extremely popular, and a local retirement specialist would be able to help find the best fit for you.
Retirement can be a scary thought for baby boomers these days. If you are a boomer, know that insurance carriers are coming out with innovative products that will help you get to and through retirement.