(ARA) - How do you picture yourself spending your golden years? Doing all the things you dreamed of doing, or still working to make ends meet? Most Americans would rather play golf, hike, travel or relax on the beach, but to make that possible, it's going to take planning.
According to the National Retirement Planning Coalition’s (NRPC), September 2002 Retirement Readiness Study, 77 million baby boomers are fast approaching retirement with insufficient plans. Another study found that nearly two-thirds of respondents saved for vacations or to pay down credit, while fewer than half saved for retirement.
Plus, Americans are generally unaware of how much money they'll need to save for retirement and how they are going to make that money last as long as they do, research from the NRPC shows.
"A lot of people think if they're doing well financially while they're working they'll be fine in retirement, but that's not necessarily a guarantee," says John Walters, executive vice president at Hartford Life, a subsidiary of The Hartford Financial Services Group. "A combination of your pension, savings accounts and Social Security used to be enough for you to retire comfortably, but that may no longer be the case for future retirees."
Variable annuity industry sales have increased more than 10 percent in the past year, according to VARDS, the leading sales tracking and product information source for variable annuities data. It seems more financial planners are advising their clients to invest in variable annuities as a way to help boost their retirement nest egg and provide a steady stream of income once they retire.
"With life expectancies continuing to rise, Americans will likely live 25 or 30 years in retirement -- and they are worried about running out of money," says Walters. "For guaranteed retirement income, many people will find annuities a better option than trying to ration their life savings to last as long as they live."
Variable annuities offer useful features you can't find in any other retirement savings vehicle. "Annuities are the only type of investment that can guarantee retirement income for life, though the amount will vary depending on your account value and the age at retirement," says Walters. Annuities also guarantee a death benefit paid to a beneficiary, similar to life insurance, if the annuity owner dies. Some even offer "living benefits" that guarantee a certain level of income or account value. For example, Hartford Life offers a withdrawal feature that, with certain restrictions, guarantees that the investor will receive back an amount equal to the amount invested, even if the account value falls below the original investment amount.
To set up an annuity, investors can make a lump sum investment or a series of payments over time. They can earmark portions of their investment into a variety of underlying investment funds, called sub-accounts, that suit their tolerance for risk and anticipated retirement time horizon. An annuity investor can select or change their sub-account selections at any time without penalty, so their portfolio can remain flexible for all types of market conditions or for the investor's changing financial situation.
Financial experts point out that annuities are not a replacement for other types of retirement savings, but should be used in addition to them. "We suggest that people still contribute all they can to their 401(k)s, or other employer-sponsored retirement plans and IRAs before they consider investing in a variable annuity," says Walters. "Annuities are another option out there to help people who need to supplement their retirement savings to reach their financial goals."
And what should that goal be? Hartford Life has an online calculator to help you come up with the all important number. You can find it by logging onto www.hartfordinvestor.com. When you get to the site, scroll down to the tab that says Education Center on the left-hand column and click on calculators. Then follow the link that says "what will my income be after I retire."
After you come up with the number, Walters recommends you take it to a licensed broker, financial planner or other professional investment representative who can advise you on ways to help you to reach your retirement savings and income goals -- and the golden years of your dreams.
Courtesy of ARA Content
