The reality is that fixed index annuities can offer many advantages. Unfortunately, there are lots of myths out there that cloud the message. We’ve put together the following to help clear up the misconceptions.

Once you get more comfortable with the reality of annuities, we’d love to show you how one can work in your retirement portfolio. Order your custom ‘Income for Life’ Illustration and take the guesswork out of retirement income planning.

MYTH: Annuities are very complicated to understand and own.

REALITY: The concept of a fixed index annuity is very simple. In return for a lump sum purchase of an annuity contract, an insurance company promises to pay you (at some specified point in time) an income stream…for as long as you live. Or, you can use a fixed index annuity just as a wealth accumulation vehicle where your money can grow tax-deferred. While you own your contract, you enjoy 100% principal protection plus the opportunity to participate in stock market gains. But, as they say, the devil is in the details. The annuity contract itself can be very complex. There’s a wealth of information available that can help you better understand your annuity purchase. To get you started, here’s a link to our sister site www.annuitywatchusa.com with questions to ask when reviewing an annuity opportunity. And, we’re only a phone call away to discuss any questions you may have.

MYTH: When you die, the insurance company keeps all of your money.

REALITY: Most of today’s annuities, including fixed index annuities, provide death benefits. For annuities that offer an immediate income stream, if you pass on before the full contract value is paid out, your beneficiary will receive any remaining principal in your account. On deferred annuities, the death benefit includes any money left in the contract, plus any interest that has accrued prior to death. You have the option of purchasing contract riders that increase the death benefit of your annuity.

MYTH: Fixed index annuities don’t provide any advantages over other financial products.

REALITY: It’s true that you can accomplish a wide variety of retirement planning objectives using other financial products. However, fixed index annuities provide a distinct combination of advantages including principal protection, tax-deferred compounding, and death benefits. Some features of annuities — such as providing predictable guaranteed lifetime income — are non-existent in other investment products.

MYTH: Annuities are for much older people or exceptionally conservative investors.

REALITY: Fixed index annuities may be appropriate for individuals facing a wide variety of  retirement planning scenarios. The lifetime income component is especially important to individuals in or near retirement. But, they can also answer some concerns of younger investors. Fixed index annuities have proven to be an excellent alternative to the stock market by providing exposure to market-based gains while eliminating losses.

MYTH: Annuities have a lot of hidden fees and charges.

REALITY: In most standard fixed index annuities, no direct fees are involved. The only fees that might be incurred are those that cover optional value-added riders, such guaranteeing a specific amount of income or providing an enhanced death benefit. A surrender charge may apply for cashing out an annuity early.

MYTH: Surrender charges only benefit insurance companies.

REALITY: Including penalties for closing your annuity early allow annuity providers to take a longer-term approach to making your money work for you. A surrender charge discourages you from withdrawing before a specified term. It’s important to understand what restrictions your contract stipulates for surrendering early. In some cases, contracts will allow you to withdraw up to 10% of your balance after the initial year of purchase without penalty. In addition, you may be able to take a loan against your annuity without suffering any surrender penalties.

MYTH: The returns on a fixed index annuity are low.

Reality: With a fixed index annuity, the returns are directly tied into an external index’ performance, such as the S&P500. If the market does well, your annuity has the opportunity to do well. If the market is down, your principal is protected against any loss. The amount of interest credited to your annuity account is determined by the crediting method or methods you chose when you first purchase your annuity. You may change crediting methods each year on the anniversary of your contract. You may learn more about the most common types of crediting methods by clicking here.

MYTH: Crediting methods are designed solely to increase insurers’ profits.

Reality: Insurance companies don’t experience a windfall effect if the market or interest rate outperforms expectations. They purchase hedges to fund the index credits (interest) paid to you in the event of stock market gains. The cost of those hedges determines the limits that are set for each annuity. The costs incurred by the insurance company are also behind the reason why you do not receive all of the market’s upside. In exchange for promising to protect your principal and provide you a guaranteed stream of income for as long as you live, the insurance company keeps a portion of any stock market gain.

MYTH: Fixed index annuities can’t keep up with inflation.

REALITY: Whether you’re retiring tomorrow or ten years from now, inflation can erode the purchasing power of a dollar…regardless of where that dollar is invested. Inflation fears may force people into risky investments that can gain value even faster than the inflation rate. Or, people may look to putting their money into low-risk, low-reward investments that at least hold their own. Fixed index annuities are low-risk retirement income solutions that pay a fixed rate of interest over a specified period of time. However, they also provide an added bonus of allowing investors to benefit from stock market gains while shielding them from market losses.

If you’re still concerned with inflation, you may consider an inflation-indexed annuity. An inflation-indexed annuity is a single premium annuity that removes inflation risk from your retirement planning and provides you with income for life. You can receive the income on a monthly payment, and its great benefit is that it adjusts the monthly payment upward based on the annual inflation rate. Most fixed index annuities are tied into an inflation indicator, such as the Consumer Price Index. An inflation-indexed annuity will increase your monthly payment each year based on a CPI increase during the prior year…but not decrease the payment if the CPI declines. A decrease in CPI will be used to offset any future annual increases.

MYTH: I don’t need an annuity because I have a 401(k) or IRA.

Reality: 401(k)s and IRAs are wonderful retirement savings tools. However, they don’t provide the opportunity to protect your principal while still achieving market linked returns with the ability to convert your savings into a guaranteed lifetime income stream. In addition, 401(k)s and IRAs have annual contribution limits. While some annuities may set internal limits for how much you can invest, the IRS does not limit the amount you can contribute to an annuity. This allows you to enjoy more tax-deferred savings power to help build your retirement nest egg.

MYTH: An annuity is “risk free” and guaranteed safe.

Reality: An annuity is backed by the full faith and credit of the insurance company that issues it. Most insurance companies also purchase “reinsurance” to provide further safety. In addition, each state offers additional protection up to a specified limit. When choosing an annuity, it’s important to go with top rated carriers and deal with experienced annuity professionals.

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Cathy DeWitt Dunn, President of DeWitt & Dunn, LLC, is the driving force behind Women Money & Power. With decades of experience in the financial services industry, Cathy specializes in helping individuals and families strengthen their retirement outlook with lifetime income solutions not available at traditional brokerage houses. She has helped countless investors start their personal journeys towards a stronger retirement with strategies designed to protect principal, generate retirement income that can’t be outlived, and eliminate market loss.

Divorce can have dire consequences for women and their retirement. During years of marriage, many women have focused on the day-to-day career of raising a family…instead of focusing on building any personal wealth.

If you’ve spent your life taking care of family while your spouse earned the income, here’s something you need to know – QDRO. A QDRO is a “Qualified Domestic Relations Order ” that provides a legal mechanism for receiving a portion of the retirement benefits earned by your spouse during the years of your marriage. It requires the employer to pay the non-employed spouse retirement benefits as a result of the divorce. Learn more here.

For many women, retirement savings may be the main source of income generation after a divorce is finalized. For some, retirement savings are the ONLY source of funds that can generate an income during retirement. Obtaining a QDRO can make the difference between a more secure retirement and a desperate situation in the golden years.

If you find yourself a divorce’s door, ask your attorney about the option of enacting a QDRO into your settlement.

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Cathy DeWitt Dunn, President of DeWitt & Dunn, LLC, is the driving force behind Women Money & Power. With decades of experience in the financial services industry, Cathy specializes in helping individuals and families strengthen their retirement outlook with lifetime income solutions not available at traditional brokerage houses. She has helped countless investors start their personal journeys towards a stronger retirement with strategies designed to protect principal, generate retirement income that can’t be outlived, and eliminate market loss.

A myth is a widely held but false belief. And, unfortunately, there are some myths out there that are a lot more dangerous than a random Big Foot sighting…such as myths surrounding how you’ll live during your retirement years.

While some advisors may tell you that you’ll probably be spending less money in retirement than what you’re spending now, we don’t believe it. We think this is a myth…and we want to make sure you’ve got an income plan in place that allows you to continue to live the lifestyle you want to live.

Take a look at the following. When you look towards your retirement years, will these be myths or reality?

1. You will spend less

2. You will travel less

3. You will be less active

The truth is you might not do ANY of the above. What we are seeing is that our baby boomer clients, more often than not, dream of doing the direct opposite.

If you’re like today’s retirees and future retirees, you have a healthy outlook on life and want to cherish your golden years.

When assessing your retirement planning strategies, consider these questions:

1. Do you see yourself spending less? On the subject of family, have you looked at your family tree lately? If it’s like most in America – it looks more like a bush. There are birthday presents, Bar Mitzvahs, Christmas presents, private tuition to help with… you name it. In addition, medical expenses will rise as you age. Be sure you factor in all spending variables when planning.

2. Do you want to travel less? When the grandkids are born, are you going to be content with Facebook photos and phone calls? Or, do you want to be with in arms reach of that newborn? We know where we’d want to be…and we’re betting that you’re no different. Make sure you have an income strategy in place that lets you move/drive/fly as you desire.

3. Are you planning on being less active? Yeah right!! You didn’t work all those years to sit on the couch to watch the Food Channel all day long. There’s church activities, bridge club, tee times, Zumba at the fitness club, yoga at the Y, theatre with friends…and your list goes on and on.

Don’t be fooled into thinking you will be sedentary during your retirement years…and don’t find yourself in a position of having to settle for a less active lifestyle. Knowing exactly how much guaranteed lifetime income you’ll enjoy in retirement is an important step for proper retirement planning. As annuity experts, we can help you put a retirement income strategy in place that helps you live the way you see yourself living in retirement. Give us a call, drop in for a visit…or, request your free Income for Life Illustration today!

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Cathy DeWitt Dunn, President of DeWitt & Dunn, LLC, is the driving force behind Women Money & Power. With decades of experience in the financial services industry, Cathy specializes in helping individuals and families strengthen their retirement outlook with lifetime income solutions not available at traditional brokerage houses. She has helped countless investors start their personal journeys towards a stronger retirement with strategies designed to protect principal, generate retirement income that can’t be outlived, and eliminate market loss.

This makes a lot of sense. Many savers get discouraged when they discover how much money they’ll need to accumulate before retirement. The blog post provided this example: If you were using a “safe” annual withdrawal rate of 4%, you’d need to have $1.5 million saved in your retirement portfolio in order to enjoy $2,500 in monthly income over the course of 30 years.

Overall, the article offered some sound advice with tips like generating retirement cash flow from dividend investing, rental properties, and part time work.

However, in a discussion on generating income in retirement, there was a glaring error of omission. There was not a single mention of the benefits of owning an annuity.

Despite a lot of popular and pervasive myths out there, all annuities are not created equal. And they’re not all bad for you. In reality, the right annuity may be one of the strongest options out there that generates guaranteed retirement income––income you can’t outlive.

Just this week, we provided an Income for Life illustration for a client. The gentleman was 62 years old, lived in Texas, and wanted to see what type of income $500,000 from his 401k could generate during his retirement years. Based upon his specific retirement goals, we suggested a Fixed Indexed Annuity with a 5% income rider and a 25% premium bonus. With this annuity, his pre-tax income from his premium would equal $34,453 per year. That’s $2,768.75 per month, a couple hundred bucks more than the 4% example on $1.5 million in savings that we showed above. His annuity includes a death benefit, which means when he passes on, his heirs will receive whatever is left of his original premium, less any income paid prior to his passing.

That doesn’t sound so bad, does it?

Why worry about what the future will bring? Especially when it comes to how much lifetime income you can enjoy in retirement.

Find out for sure what kind of guaranteed lifetime income an annuity could provide to you. Simply click here to receive your Income For Life Illustration. Remember, as with all retirement products, there are pros and cons on owning an annuity and we’d be happy to discuss them with you in detail.

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Cathy DeWitt Dunn, President of DeWitt & Dunn, LLC, is the driving force behind Women Money & Power. With decades of experience in the financial services industry, Cathy specializes in helping individuals and families strengthen their retirement outlook with lifetime income solutions not available from traditional brokerage houses. She has helped countless investors start their personal journeys towards a stronger retirement with strategies designed to protect principal, generate retirement income that can’t be outlived, and eliminate market loss.

The GAO’s June 2011 report to the U.S. Senate’s Special Committee on Aging made several specific recommendations to help protect or improve an individual’s retirement security.

One of these recommendations specifically called for considering an income-generating annuity as part of an investor’s overall retirement plan:

• Instead of opting for a lump sum payout from an employer-sponsored defined benefit plan, middle-income retirees should consider converting at least part of their savings into an inflation-adjusted annuity or choose a guaranteed stream of income from an annuity.

Why an annuity instead of a lump sum payout? Annuities provide guaranteed lifetime income.

An annuity is a contract between you and an insurance company, which provides a stream of income, income that you cannot outlive. There are different types of annuities that may fit your portfolio, depending on your individual risk tolerance and retirement timeline. For example, if you want minimized risk, tax-deferred growth and a guaranteed interest rate then a Fixed Deferred Annuity may be right for you. It offers the ability to convert its accumulated value into an income stream that lasts your lifetime.

If you prefer the opportunity for a higher return then you may be interested in a Fixed Index Annuity in which your money grows tax-deferred at an interest rate based on changes in an index, such as the S&P 500. With this annuity in your portfolio, your principal is protected with the opportunity to grow as the market rises. There are other annuity options too, some for more conservative investing and some with greater risk but more growth potential.

We can help you take the uncertainty out of retirement income planning. Simply click here to request a free Income for Life Illustration. Your Income for Life Illustration shows you the top 3 income generators tailored specifically to you. With this information, you’ll know without a doubt what income you can expect during your retirement years.

Or, call us at 972-473-4700 to talk more about whether it makes sense for you to convert a portion of your savings into an income-generating annuity. With thoughtful and careful planning we can help you stop worrying about your retirement security, and instead, focus on enjoying a secure retirement.

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Cathy DeWitt Dunn, President of DeWitt & Dunn, LLC, is the driving force behind Women Money & Power. With decades of experience in the financial services industry, Cathy specializes in helping individuals and families strengthen their retirement outlook with lifetime income solutions not available at traditional brokerage houses. She has helped countless investors start their personal journeys towards a stronger retirement with strategies designed to protect principal, generate retirement income that can’t be outlived, and eliminate market loss.

We encourage you to play around with an inflation calculator to get a firm understanding of how inflation can drain the power of your retirement savings.

You’ll quickly see that inflation relentlessly erodes the value of each dollar in your portfolio. As the years go by, many people find themselves forced into risky investments that promise to outpace inflation – or into low-risk, low-reward investments that at least hold their own.

 There’s a better way to prepare for inflation––an inflation-indexed annuity.

An inflation-indexed annuity is a single premium annuity that removes inflation risk from your retirement planning and provides you with income for life. You can receive the income on a monthly payment, and its great benefit is that it adjusts the monthly payment upward based on the annual inflation rate. Most indexed annuities are tied into an inflation indicator, such as the Consumer Price Index (CPI). An inflation-indexed annuity will increase the monthly payment each year based on a CPI increase during the prior year…but not decrease the payment if the CPI declines. A decrease in CPI will be used to offset any future annual increases.

If you’re worried about inflation taking a bite out of your retirement dollars, we can help you take the bite out of inflation. Simply click here to request a free Income for Life Illustration. Your Income for Life Illustration shows you the top 3 inflation-defeating income generators tailored specifically to you. With this information, you’ll know without a doubt what income you can expect during your retirement years.

If you were living under a rock last year, we want to be the first to inform you that 2011 wasn’t so pretty, economically-speaking. Unemployment floated close to 10%, prices for everyday things rose 6%, foreclosures rates were high, gas rose 16% on average from the previous year, cotton is at a high that hasn’t been seen since Ulysses S. Grant was in office, the freeze in Florida will surely affect the costs of any citrus-based drinks, the peanut crop is having the worst harvest in 30 years… and so on and so on and so on…

So here’s the good news – okay…there’s not that much good news. The outlook for 2012 isn’t promising to be much better.

We didn’t set out to write a doomsday blog but, jeez, things are tough!

But, as “they” always say, if you can’t beat it…learn about it, understand what you’re up against, and plan for it!

Here are a few facts and figures to keep in mind for 2012:

1. Grocery prices rose 6% on average in 2011. With the cost of raw materials on the rise (expected to rise another 2% in 2012), manufacturers are shrinking the packaging, while raising the prices. At one retailer, the packaging design for one brand of dog food remained the same except for one tiny little detail: instead of 20 lbs, it now reads 16 lbs. Toilet paper rolls now fit in the recessed fixtures of older homes when they didn’t only a mere 8 years ago. Pay close attention to what you’re paying versus what you’re getting.

2. With constant turmoil in the Middle East, gas prices are expected to rise over $4. Maximize your errands by plotting the route so you aren’t doubling back, etc. Also, stick the kids on the bus, carpool. And c’mon Chevy – how about an energy efficient car that doesn’t explode!?!?!?

3. Shipping for US Postal Services, FedEx, and Ups is expected to go up around 5% more. Our days of buying items from online retailers that “ship for free” might be coming to an end. So, if you are buying online, try to bundle the shipping for several items from the same retailer to save on shipping costs.

4. Need Caffeine to start the day? Here’s where it’s going to really hurt the most. According to Bloomberg news, the beans needed to produce a caffeinated drink may rise as much as 40%. Not big into caffeine but chocolate is your vice? Due to the instability in the Ivory Coast (the largest cocoa producer) Hershey Co. announced at 9.7% increase in wholesale prices. We don’t want to sound like crazy cranks…but stockpiling some chocolate may not be a bad idea!

5. Higher oil prices will affect us in ways that we just don’t think about. Take diapers as an example. Kimberly Clark, the maker of Huggies, will be increasing prices 3-7% this year. Maybe it’s the impetus you need to potty train the kids or your kids’ kids. Godspeed, my friend.

Most of us try as hard as we can to live within our means…and knowing what we’re up against, money-wise is critical. Whether you are a senior on a fixed income or working in the job market – cost of living adjustments (aka raises) were few and far between in 2011…and may be even scarcer in the future. So be sure to stay educated on the rising prices in consumer goods. It’s a good start for budgeting in an every-changing world where day-to-day decisions will impact your long-term income plan.

Call us to help you with your long-term financial plan. Putting a plan in place now will help you ring in future years with less potential for headaches.

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Cathy DeWitt Dunn, President of DeWitt & Dunn, LLC, is the driving force behind Women Money & Power. With decades of experience in the financial services industry, Cathy specializes in helping individuals and families strengthen their retirement outlook with lifetime income solutions not available from traditional brokerage houses. She has helped countless investors start their personal journeys towards a stronger retirement with strategies designed to protect principal, generate retirement income that can’t be outlived, and eliminate market loss.

Maybe the larger truth is that better managing the minutia––not fulfilling lofty start-of-the-year resolutions––is the key to bettering our financial lives.

It has been said that “if we take care of the moments, the years will take care of themselves.” We believe that this incredibly astute adage is the perfect guide for women and saving for retirement. And, with the New Year upon us, it’s a great time to adopt it as a guiding principal for paving the road to a more secure retirement future.

This year, why not resolve to take just a moment to evaluate the little things in your life––day-to-day decisions that can easily impact your savings plan. Here are just five little things to consider…facebook us your ideas.

1. Buy the retail brand – in most cases, the brand name is equivalent to the national brand. We admit there are just some name brands that can never be replaced but if you move the majority of your grocery list into the retail brand, the savings will add up quickly.
2. Brown bag it – lunches typically run around $5 at a fast food restaurant and if you eat at a sit down establishment you are closing in on double digits. Saving just $5/day and investing this money with a 9% return, you could amass $100,000 in 20 years. From age 22 to 65, you would have saved…….are you sitting down….$1 million.
3. Trim the cable channels – Nielsen Research found that the common household watched only 15 channels but paid for over 100 channels. Trim your plan and the savings will add up.
4. Ask yourself if you really need it – yes, new leather boots (on sale!) sound like a great idea. But, if you’re like most women, you’ve got tons of shoes. This “ask yourself” principal can save you thousands over the course of a single year.
5. Squirrel away your pennies – dedicate all the money that you’ve saved from “sweating the small stuff” into your savings account. Use this extra cash to either pay off chunks of credit card debt each month or max out your 401k with an end of year contribution.

In 2012, make a resolution to pay attention to the small things, each and every day. A dollar saved here or there can positively affect your years down the road…long after lofty resolutions are forgotten.

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Cathy DeWitt Dunn, President of DeWitt & Dunn, LLC, is the driving force behind Women Money & Power. With decades of experience in the financial services industry, Cathy specializes in helping individuals and families strengthen their retirement outlook with lifetime income solutions not available from traditional brokerage houses. She has helped countless investors start their personal journeys towards a stronger retirement with strategies designed to protect principal, generate retirement income that can’t be outlived, and eliminate market loss.

To help you out, we’ve found a handy reference article on year-end tax tips. Get up to speed on money-saving tax deductions that are set to expire in 2011 along with other tips with no expiration dates. Minimizing your tax burden is essential to your investment planning whether you’re still in the workforce or just about to retire. Call us today to schedule a complimentary beginning-of-the-year retirement planning checkup.