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Planning will make the difference!

25 Common Questions on Retirement Planning along with our RetirementSense™ Answers :


1. Q. What is my 1st step in the retirement planning
    process?

A. Determine your exact date of retirement. Calculate how many years you will be requiring an on-going income flow.

2. Q. Once I know my retirement date, what next?

A. Calculate your monthly expenses. Exactly, not generally. Take everything into consideration. Make 2 lists: separate your basic survival requirements from your lifestyle expenditures. Be certain. Determine the amount of money you will require for monthly/annual basic survival needs? Determine how much supplemental income you will require to fund your lifestyle.

3. Q. I have always done my own investing, can I continue
     to do my own retirement planning?

A. We recommend that you NOT go through this process alone. An experienced advisor will be helpful in identifying common planning oversights. Planning for retirement is very different than saving money and accumulating assets.

4. Q. When do I stop the Accumulation Phase of retirement
    planning?

A. We recommend that you continue to accumulate assets for retirement as long as you can.

5. Q. At what age do I begin to plan for the Preservation
    and the Distribution Phases of the retirement planning
    process?

A. We suggest that the ideal time to begin planning for the preservation and distribution phase of retirement is generally between ages 55-60. The general rule of thumb is to allow at least five years to segue into a more appropriate portfolio that is suitable for your retirement income requirements.

6. Q. How do I prepare my investments as I near
    retirement?

A. This will be determined by the suitability of your current investments as they relate to your current risk/return profile and your basic and lifestyle income requirements. Preparation may require a restructuring of some of your money or investments into more appropriate investment instruments.

7. Q. I don't think I have enough money to actually retire.
    Now what?

A. For some, retirement may bring the opportunity to explore new avenues to generate income, such as consulting work or work in a related field or through a hobby that has income-generating potential. Keep in mind at some point your ability to generate earned income will begin to diminish or end entirely so it is important that you confront the issue of adjusting your lifestyle to match your income flow.

8. Q. How do I know if the mutual funds, annuities, stocks,
    bonds, CDs and real-estate I have used to accumulate
    my investment portfolio are still appropriate once I
    actually retire?

A. You will need to do your homework here. The first step would be to determine whether the investments you currently have meet the new standards of your pre-retirement/retirement risk/return profile. It is very important to keep in mind that past performance does not guarantee future returns when evaluating any investment.

9. Q. Should I take my money out of my 401k as a lump sum
     distribution?

A. Generally speaking no. It is usually - but not always - not wise to take a lump sum distribution of any tax preferred vehicle. There are many options available to you that would preserve the tax status on the account and still provide you use of your money at the time it is needed.

10. Q. Should I keep my 401k money with my employer plan
     after I retire from the company?

A. Usually you will have more investment options if you roll your 401k balance into an IRA or perhaps a series of IRAs outside your company plan.

11. Q. Is rolling over all my 401k money to an IRA or series
      of IRAs a good idea?

A. The rollover strategy often provides you more investment diversity and control over your money.

12. Q. If I need to restructure my investments, when is the
      best time to do this?

A. A clear understanding of your current risk/return profile and the actual evaluation of the investments in question will serve as guidelines. Ask yourself two questions: what is your time horizon until retirement? And if the particular investment were to tank, how badly would it affect your total portfolio? Be cautious.

13. Q. What is a "conservative" investment portfolio?

A. A more conservative portfolio is characterized by investments that have a lower risk of loss.

14. Q. Should I move my money to bonds when I retire?

A. Diversity within your retirement investment portfolio is important. Some growth in a portfolio is important, if only to hedge off inflation. We do not recommend that all your investment money be placed in any one investment option. Research whether a variety of individual bonds, a bond mutual fund or a bond index fund would best serve your requirements.

15. Q. Should I place my IRA money in a bank CD?

A. Certificates of deposit are a useful retirement planning instrument. However, it usually is not a wise investment decision to put all your money in any one investment instrument.

16. Q. How do I choose a financial advisor to help me with
      the retirement planning process?

A. We recommend that you look for someone with a minimum of 15 years experience in the financial services industry, preferably in the area of retirement income management for people age 50 and older. The retirement planning process is very different than investing in general. Being singularly licensed as an investment advisor or insurance agent may not be enough. Planning for retirement is an intimate and personal process. Choose someone who has appropriate credentials, extensive retirement planning experience and good references as well as a personality and communication style that you are comfortable with.

17. Q. How does "life planning" relate to retirement
      income planning?

A. Life planning is the initial part of the retirement planning process. This is when an advisor who is experienced and trained in lifestyle evaluation will help you identify what your lifestyle will be when you retire.

18. Q. Are there investment products that will guarantee
      my principal invested?

A. Yes, fixed annuities guarantee the return of principal. There is a new generation of annuity products specifically designed to meet the growing demand of the needs of the pre-retirement and retirement population. Researching this product category is like entering a labyrinth, so do yourself a favor and seek the counsel of a qualified financial advisor that is well versed in annuities.

19. Q. Who or what is guaranteeing my principal in
      an annuity?

A. The principal (known as premium) placed in these products is guaranteed by the claims-paying ability of the insurance company that issues the product. In other words, the financial strength of the insurer behind your investment premium determines the quality of the guarantee. In addition each state offers some protection from insurance company default through the individual State Guaranty Association. The amounts covered vary from state to state. A complete listing of states and their respective insurance departments and phone numbers can be found at www.immediateannuities.com.

20. Q. Are there many different kinds of annuities?

A. Yes! There are hundreds of different contracts available and they can be very complicated. There are 2 basic categories of annuities: 1.) fixed annuities which include indexed annuities and 2.) variable annuities. You should work with a licensed professional who has an extensive background and education in retirement planning and annuity products.

21. Q. Are the fees and sales charges for these products
       high?

A. This depends on the type of annuity. Most fixed and equity index annuity products are structured so 100% of the premium deposited goes to work for you immediately. Annual fees are not the norm. Variable annuities are different and usually charge substantial on-going annual fees. All annuities have surrender charges, which are charges made against the annuity's assets if the product is liquidated within a specified number of years of the original purchase. Please request full disclosure regarding any surrender charges, commissions, sales charges or fees that may be calculated into the product BEFORE you make your purchase.

22. Q. How are sales charges, fees and commissions
      structured in annuities?

A. Annuities have surrender charges. The fees, commissions and sales charges are taken into consideration through a complicated actuarial computation and are reflected in the length of the surrender charges. Your initial deposit is called a premium and goes to work for you immediately; however, there can be significant restrictions on when and how much money you can withdraw.

23. Q. Where can I get an annuity?

A. Annuity products are obtained through state-licensed agents. Stock brokers and registered representatives must be insurance licensed within the state where they are offering and placing annuity products. Insurance companies and only insurance companies create annuities. Insurance companies have a different distribution system than mutual fund companies or wire houses which carry stocks and bonds. Fixed annuities are sold by any licensed insurance agents. Variable annuities may only be sold by persons who sold both securities and insurance licenses in the state where you live.

24. Q. Are annuities really a good idea?

A. Annuities are designed for the preservation and distribution phases of retirement and historically are used for income planning. The rule of thumb here is this: if you do not have time to earn back a potential loss of principal, it only makes sense that you would consider having some percentage of your principal protected.

25. Q. Can I wait until the year I am going to retire to start
      the retirement planning process?

A. Not if you can help it! Retirement planning is not just about money, it is about how you are going to spend the last 20 to 35 years of your life. Start planning now!