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What about retirement insurance?

Posted: March 2, 2009 8:11 p.m.
Updated: March 3, 2009 4:59 a.m.
If you could have bought insurance on your retirement account to guarantee not losing your principal and earnings value last year, how much would you be willing to pay to insure it?

If your retirement account was invested like most Americans', in a diversified portfolio of stocks and bonds, your value could have reduced in 2008 by 30 percent to 50 percent depending on the portfolio and diversification.

So, knowing that information today, how much would you have been willing to pay to insure your retirement principal and future income against that loss? We all buy insurance for our homes, cars, life, and our expensive toys.

Yet most of us don't know about or have not taken advantage of the ability to insure against the loss of value of the principal and growth of our retirement plan and its ability to provide our future income.

The trick is buying insurance against the loss of income and value of this valuable asset.

I have mentioned variable annuities in many previous articles as an option to protect our retirement plans.

Variable annuities have been offered by the insurance industry for many years, but only in the last 10 years have some companies started offering an income rider that would guarantee the principal and growth for future income.

And VA's have evolved with more flexibility and options than when originally introduced.

This flexibility for changes in the future makes them advantageous for a portion of our retirement planning that we want to protect from the type of market volatility we are experiencing at this time.

How long will it take for this bear market and the mitigating circumstances causing it to turn around?

When it does, and it must, how long will it take you to regain what principal and earnings you have lost?

My son Nick and I have offered to our clients the option of moving some of their retirement assets into VA's since these income riders were introduced to us in 2001.

We have preached that some portion of retirement assets should be in these investment vehicles since they protect the principal from devaluation from market downturns, guarantee growth, step up's if the market outperforms the guarantee, and guaranteed lifetime income for you and your spouse from the riders highest value attained.

The benefits and value offered more than offset the cost of these optional riders, based on our research and evaluation.

As discussed, only a few of the many insurance companies in America can offer these riders. That is because state and federal regulations require reserves necessary to guarantee these values, and federal and state rules and oversight are very strict and strongly enforced.

And it is my opinion if the banking system had these regulations and oversight for loans, we would not be in the financial crisis we the taxpayer will be paying for many years to come.

Jim Lentini, CLU, ChFC, IAR 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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