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So, you need income?

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Posted: June 13, 2008 2:51 a.m.
Updated: August 14, 2008 5:02 a.m.
You have worked hard all your life to accumulate a pool of retirement assets. Now, or at some time in the near future, you will want to turn all or a portion of that pool of assets into a stream of income that will last as long as you live. It won't be easy with the ups and downs of the economy, which is normal, but currently we have to be more concerned for the additional problems caused with our energy costs and the financial markets fiasco.

What do you do? You have to plan ahead. If you don't, you may face a number of uncertainties that can get in your way, and make it more difficult to accomplish your retirement dreams.

What could stand in your way?

n First, you can never be sure how long you will live. You may actually live longer than you think. In fact, you may spend 20 to 30 years in retirement. That means you will need to plan to have income that will last for the rest of your life, no matter how long that is.

Medical advances and healthier lifestyles have helped to increase the average life expectancy for both men and women over the years.

Remember my previous note that a couple age 62 nonsmokers, one can be expected to live to age 92.
n It's tough to predict how much things will cost in the future. In 1975, a gallon of gas was 49 cents, the average car cost $4,400, and the average home was $30,000. We know what's happened to the cost of gasoline and homes. What do you think a trip that costs $5,000 today will cost in 20 years?

n You never know what the market will be doing when you need income.

More than likely, you will need income when you stop working full-time, and you will need that income to last as long as you do.

The timing of that need can make a big difference. That's because a market downturn during the years right before and right after retirement can have a significant adverse effect on your retirement nest egg. It's during that time that you have the most money to lose.

What is the solution? Getting income for life doesn't have to be a mystery. You can guarantee a stream of income that will last as long as you do no matter how long you live, how much things cost in the future, or what happens in the market. One way to do this is to purchase a variable annuity with an optional lifetime income protection benefit rider.

As noted in previous columns, this is the only product I'm aware of that can today guarantee the principal, guarantee it to grow while waiting for the future retirement date, step up and lock in market increases if it outperforms the minimum guarantee you purchased and guarantee income for you and your spouse for your lifetimes.

When you consider buying a product offering guarantees with stock market investing, you should only consider investing with the most reputable and largest investment companies. That's why variable annuities are only offered by life insurance companies, as there structure and government regulation allow them to offer guarantees.

That's why there are only about 27 of the larger companies that can afford to offer the guarantee riders with their variable annuities.

Be sure to discuss variable annuities and their guarantee options with your financial advisor. The products and riders vary from one company to another and you should evaluate all your options to see which best fits your wants and needs.

Jim Lentini, CLU, ChFC, IAR is president of Lentini Insurance & Investment. His column represents his own views and not necessarily those of The Signal.


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