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Jim Lentini: What is a guaranteed income worth?

Posted: June 1, 2009 10:25 p.m.
Updated: June 2, 2009 4:55 a.m.
A report entitled "Social Security, Medicare Face Insolvency Sooner" was published recently in the Wall Street Journal.

It predicts, in short, that the Medicare fund for hospital care will be depleted in 2017, two years earlier than estimated just a year ago.

And it predicts that Social Security funding will be depleted by 2037, four years earlier than expected.

Cathy Weatherford, CEO and President of NAVA, the association for Insured Retirement Solutions, that same day released the following response: "This troubling news with Social Security is yet another reason why people should turn to insured retirement solutions to make their retirement goals a reality. The majority of Americans have come to trust in Social Security and we must do everything we can to ensure its solvency. However, we cannot rely on Social Security alone. The best way to ensure retirement security is by investing in insured retirement solutions."

What does this mean to you and your retirement plans? What can you do for the retirement plans you control, as we find government handling of the mandatory plan you may have been counting on is fading away?

As discussed and explained in previous articles, one of the only insured plans invested in the market that can guarantee future values for retirement income is a variable annuity offering living benefits.

Variable annuity fees may seem high, but many investors feel a guaranteed source of retirement income is worth it, especially now that pensions seem to be things of the past and Social Security appears to be in danger of fading.

I know of no other vehicle that allows you to stay fully invested in the market to take advantage of upswings, and at the same time is fully protected from downturns for a guaranteed future income that you cannot outlive.

Retirement confidence hinges on the stability of a guaranteed income.

In mid-2007, AllianceBernstein, a respected investment money manager, conducted a survey of 13,000 investors who worked with financial professionals.

They asked several questions about the role of guaranteed income in retirement.

More than 93 percent of the investors surveyed indicated they would like a guaranteed source of income throughout their retirement.

Further analysis found just how important income security is.

About 90 percent of respondents said a guaranteed source of retirement income would make the biggest difference in feeling confident in retirement.

With pensions and Social Security facing increasing difficulties, investors want guaranteed income.

But, are they willing to pay for it? The AllianceBernstein poll discovered that investors are willing to pay between 4 percent and 6 percent of assets to guarantee they will not run out of money in retirement.

And, while retirement can last 20, 30, or more years, many investors feel the guarantee is not only crucial, but worth it.

Nothing makes an income earner more secure than knowing that they and their spouse will be secure for the unknown future, can rely on a minimum guarantee income and not be a burden for their families.

Fortunately, most of the quality insurance companies offering variable annuities do not charge the fees that investors are willing to pay for being secure and give them contentment and peace of mind for their future.

Remember, as I have quoted many times, Will Rodgers stated after the depression in 1929, "I'm not so concerned of the return on my money, as the return of my money." With a variable annuity, you can have both.

Jim Lentini is President of Lentini Insurance & Investments, Inc. He can be reached at (661) 254-7633. His column reflects his own views and not necessarily those of The Signal.


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