Standing up and moving forward from a financial mess
by Danny Mensh
Summer’s here, and we’ve fortunately moved past tax season and the end of the school year. It’s a welcome break from the exhaustive reports of economic doom and gloom as well.
Or is it? There are dozens of people on TV telling us what we’re supposed to be doing now, and they all seem to offer conflicting advice: Hold onto stock, sell stock, get out of the stock market, buy bonds.
The truth is, most people have lost a degree of confidence in the stock market. Unfortunately, if you’re a retiree or are older than 65 and still working, you don’t have time to sit and wait for your portfolio to return to pre-crash levels. It’s time to begin searching for other sources of income.
This is one of those times when it’s important to stand up, brush yourself off and take steps toward your financial future. Paralysis in planning won’t help. If you still have your job and most of your wealth, congratulations. But if you’ve lost principle and your job status is shaky, you’re not alone.
One area that has garnered increased attention recently is the world of annuities. If you or family members have $50,000 or more sitting in bank CDs earning slight interest, then perhaps moving some or all of this to an annuity vehicle makes sense.
An annuity is a promise to pay an ongoing sum of money by an insurance carrier to the insured for a period of time, which could be one’s lifetime or a specified number of years.
A single-premium immediate annuity requires the initial contribution of a sum of money to an insurance company in return for a guaranteed income stream per month, which can be for one’s lifetime or a specific period as well. Much of the income generated can be tax-free to the recipient and can provide a higher fixed guaranteed return than almost any other financial investment tool on the market today.
I recently was asked to take $300,000 and provide a guaranteed income stream to a male in his early 50s for 30 years. Due to financial needs from other family members, he would have the income continue to pay his named beneficiaries if he died at any time before the end of the 30-year period. In this scenario, the plan would pay more than $1,700 per month, more than half of which would not be taxable.
Another optimal annuity scenario is for a somewhat healthy person in his or her 60s or 70s. While it might be difficult to secure a long-term care insurance policy because of medical underwriting limitations, turning some cash into a new income-producing plan could provide some or all of the potential funds to pay care providers in the absence of insurance. In this case, the annuity has a guarantee that the client will use those dollars for his or her own personal use.
Annuities are a tool that can help free up otherwise nonworking assets and alleviate some of the current and future income pressures that our changing environment has created. We’re at a stage when we all could use a thorough analysis of our financial goals and retirement plans. It’s too important to be put off until fall.
For specific questions about your financial planning or insurance needs, call, e-mail or text the author.
About the expert
Danny Mensh entered the insurance industry in 1996 and became president of Mensh Insurance in 2007, taking over a family business that has been in existence since 1968. With more than 10 years of experience, Mensh is certified in long-term care and brings an independent approach to discussions concerning life and disability insurance for individuals and businesses. Planning topics range from protecting income due to disability or premature death to estate planning and preservation measures.
Mensh has appeared on radio and has filmed various educational programs on insurance issues, and has written articles in local and regional magazines on the topic. He received a Bachelor of Arts degree from Duke University in Durham and is active in the Duke Alumni Association in North Carolina. He also is a member of the National Association of Insurance and Financial Advisors, National Association of Health Underwriters, and American Association of Long Term Care Insurance. To learn more, call (336) 631-5503, e-mail firstname.lastname@example.org or visit www.menshinsurance.com.