Overtime everyone has certain stages in their life when their lifestyle changes. Planning ahead for these events can ease financial stress and no event requires more planning than your retirement. This is what we strive to help you with at Orlando Insurance Advice
According to experts, people nearing the retirement stage of their life should give much more attention to matters they have put of, or forgot to consider such as health coverage and investing in a group of assets to protect their income and ensure their savings will last throughout their retirement.
The following information briefly touches some important things to consider when beginning your retirement planning
The vast majority of people age 65 and older think of medicare as being their health coverage. However, even with Medicare, expenses such as coinsurance, deductibles and co-payments can be a great financial burden. This is why millions of Americans are now participating in some sort of medicare supplement insurance policy to cover the holes in their coverage. This insurance can work to automatically process claims taking the burden off of the participants themselves.
Guaranteed Sources of Income
Once your paycheck is gone, retirees often find themselves missing the steady income they used to receive which payed their fixed expenses. This is were a single premium immediate annuity can help. Annuities are a form of insurance that can guarantee a source of income for the rest of your live. Some even allow you to take advantage of the growth in the market while also protecting your savings if the market were to crash. Many people see their 401k as all they will in retirement but what happens when that money is gone or they live longer than expected? This is where an annuity can come in handy.
Long-Term care needs are another important factor in planning for retirement. With the dramatic increases in life-expectancy over the past 30 years, so arises the likelihood of needing some sort of long-term care insurance. Cost increases within the healthcare industry are astronomical and still continue to rise each year. Making the option to self fund these services with your assets can have a negative effect and even deplete your retirement savings. Long-term care insurance protects you retirement and assets so you don’t have to sit there and watch everything you worked so hard for just be blown away.
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For many investors, investing typically begins with one stock or mutual fund. Over time, other selections are added because many people understand it may not be prudent to invest everything in a single security, even if it has a “blue chip” reputation. However, just “spreading money around” in a haphazard way may create only an illusion of diversification.
If you have assembled a “hodgepodge” portfolio, you may not know the extent to which your investments are (or are not) consistent with your objectives. How do you go about setting up a framework which tailors your investments to your particular circumstances?
A sound portfolio management strategy begins with asset allocation – that is, dividing your investments among the major asset categories of equities, bonds and cash. Since each type of investment category has unique characteristics, they rarely rise or fall at the same time. Then, you can make finer distinctions within each asset category (i.e., diversification). Combining different asset classes could help reduce risk, although it doesn’t eliminate market risk altogether. Still two nagging questions remain: What factors guide the asset allocation process? How much of a portfolio should go into each category.
To answer the first question, the main objective of asset allocation is to match the investment characteristics of the various investment categories to the most important aspects of your personal investment profile – that is, your tolerance for risk, your return and liquidity needs, and your time horizon.
Investing according to your risk tolerance will help keep you from abandoning your investment program during times of market turbulence. One way to measure your risk comfort zone is to ask yourself how much of a loss in a one-year period you could withstand and still stay the course.
Finding an appropriate match for you means balancing your tolerance for risk against the different volatility levels of various asset classes. For example, if you have a low tolerance for risk, that fact may dictate a portfolio that emphasizes conservative investments while sacrificing the potentially higher returns that usually involve a greater degree of risk.
Return need refers to the income and/or growth you expect a portfolio to generate in order to meet your objectives. For example, retirees may prefer a portfolio that emphasizes current income, while younger investors may wish to concentrate on potential growth.
Your personal time horizon extends from when you implement an investment strategy until you need to begin withdrawing money from a portfolio. For example, a very short time horizon (less than 5 years) is probably best served by a conservative portfolio emphasizing safety of principal. On the other hand, the more time you have to invest, the greater risk you may be able to withstand because you have time to recover from market downturns.
The short answer to how much of a portfolio should go into each category is that asset allocation is more a personal process than a strategy based on a set formula. There are guidelines to help establish the general framework of a well-diversified portfolio. For example, you may decide on the need for growth in order to offset the erosion of purchasing power caused by inflation.
However, building an investment portfolio that is right for you involves matching the risk-return tradeoffs of various asset classes to your unique investment profile. One final point that is worthy of emphasis – when you put together your own asset allocation strategy, you should combine all your assets (i.e., your investments and retirement savings). That way you can ensure that all your assets are working together to help meet your goals and objectives. Keep in mind, investment return and principal value will fluctuate with changes in market conditions so that shares may be more or less than original cost. Diversification cannot eliminate the risk of investment losses.
Annuities have been around longer than the United States, but it wasn’t until the Great Depression that they started to become popular. In the 1930s, Americans who were concerned about the health of the financial markets turned to products offered by insurance companies because they were seen as more stable.
Since that time, an array of annuity products has been introduced, including the variable annuity in 1952.2 During the past half century, variable annuities have been both embraced and reviled. Their complexity is a common source of confusion, which means any decision to buy a variable annuity should be made carefully and with proper guidance.
Nonetheless, a variable annuity could play an important role in a retirement portfolio. These facts about variable annuities may help you understand them better.
A variable annuity is a long-term investment vehicle designed for retirement purposes. It is a contract in which one or more payments are made to an insurance company, which agrees to pay the contract holder an income in the future. The interval between when the contract is purchased and when it begins producing income is usually several years, which may make a variable annuity less appropriate for older investors. Withdrawals of annuity earnings are taxed as ordinary income and may be subject to a 10% federal income tax penalty if made prior to age 59½. Surrender charges may apply if the annuity is surrendered during the early years of the annuity contract.
A variable annuity can take advantage of the growth potential of the stock market, but it can also lose value. It is variable because the future value relates to the performance of underlying investment subaccounts that are selected by the contract holder, usually according to his or her risk tolerance. Because variable annuity subaccounts fluctuate with changes in market conditions, the principal may be worth more or less than the original amount invested when the annuity is surrendered.
For an additional cost, the contract holder may be able to purchase guarantees, such as a guarantee of minimum fixed income payments or a guarantee to withdraw a specific amount over a lifetime, regardless of the account value. Any guarantees are contingent on the claims-paying ability of the issuing company. The investment return and principal value of an investment option are not guaranteed.
There are contract limitations, fees, and charges associated with variable annuities. These can include mortality and expense risk charges, sales and surrender charges, administrative fees, investment management fees, and charges for optional benefits. Withdrawals reduce annuity contract benefits and values. Variable annuities are not guaranteed by the FDIC or any other government agency; they are not deposits of, nor are they guaranteed or endorsed by, any bank or savings association.