Stories
CASE STUDIES
Wealthcare
IRA rollover for a lifetime of income inside of an annuity
Objective: – A single lady interested in taking early retirement at age 63 in order to receive and preserve her company pension as a full lump sum which represented over 30 years of dedicated service to her employer. The employer was about to change the company pension policy by eliminating the lump sum option, replacing it with a traditional monthly amount which would end upon death and as a result not be available to any of her beneficiaries. She wanted to provide her family with a legacy and in order to do so she was forced to agree to an early retirement. It was important to take control of her funds and manage them going forward but at the same time did not want to risk the principal or the lifestyle she had come to enjoy. She knew she didn’t want to risk her pension to the Wall Street roller coaster or cover expensive management fees.
Solution: – Centered around a variety of IRA rollovers in the form of wrapped up inside of an annuity for a) short term 15% of the funds b) mid term 35% of the funds and c) longer term representing 50% of the funds.
- Short term – to meet immediate needs from age 63 – 65 a period of 2 years. An immediate annuity designed to maintain the same monthly income she had currently been earning. At 65 she would start to take her social security income.
- Mid Term – A fixed interest annuity with a 10 year time frame but the ability to take a lump sum at the 5 year mark without any penalty and make a new choice in the event that market conditions were to change. This was acceptable to predict income based upon a fixed interest rate which was higher than the interest on bank CD’s and the flexibility for change. 10% of the annuity amount available without penalty on an annual basis.
- Long term – into a 10 year fixed index annuity offering an upfront bonus and flexibility from growth of the index over time.Increases in the index are locked into principal on the annual anniversary. Any losses in the index do not affect the locked in principal
She had access to 10% of each annuity initial value for extra funds if she needed it which more than covered her expenses. At the end of the first 5 year period she rolled the midterm fixed interest annuity forward into a new 10 year fixed indexed annuity to continue the compounding and index growth. At age 70 ½ she will have to start making required minimum distributions from both the annuities and can take the money annually as a lump sum or have it deposited into her accounts on a monthly basis thus supplementing her social security and maintaining the lifestyle she is accustomed to.
2. Bank on yourself – The many benefits of Indexed Life Insurance
Young single acupuncturist whose employer does not offer a 401k.
Objective: – Wants to save for her future retirement and heard that putting savings off would be costly in the long run and would be cheaper overall to start early taking advantage of the compounding effect of time over money. Wants to create her own financial security independently, regardless of future relationships and to protect against the uncertainties of life.
Solution: – After considering the limited scope of an IRA she decided that a life insurance policy made more sense because it offered her more flexibility in meeting the future changes that life would bring and keep pace with her retirement income needs. She chose an indexed universal life policy with a fixed monthly premium that she can afford and contribute to over the course of her working life building up compounding cash value within the policy. This growing cash value has some significant tax advantages and she has flexibility to use it for paying off a mortgage, funding long term care insurance, children’s education, and supplementing retirement income avoiding the required minimum distribution requirement at age 70 1/2 that are required of IRS’a and 401k plans and of course her family become the beneficiaries of the policy in the event of death avoiding probate.
3. 401K Rollover to IRA Annuity
Objective:- Man in his 50’s changes employer and wants to take control of his 401k. He set it up years ago with HR but the financial institution behind the company plan offered no personal face to face employee support or reviews. He did not understand the allocations in his statement or what to do or who to call to make changes. He decided he wanted better control with something easier and safer to manage to protect his principal.
Solution:- To roll the 401k over into an IRA inside of an annuity with the ability to continue adding to it going forward for a certain period of time. There is no Wall Street Roller coaster downside risk of losing principal, minimal management fees just steady growth year in year out. The gains that are earned in the up years are locked into the principal at the anniversary date and if there are no gains then nothing is locked in at the anniversary date. Every year we have an in person annual review of the statement, a discussion about beneficiary changes if any and what might be on his mind going forward with regard to retirement planning, possible funding for a long term care plan, etc.
Medicare
4. Turning 65 and transitioning to Medicare
Objective:- 65 year old self employed business owner facing retirement age………needs assistance with understanding social security rules for Medicare application and transitioning over from employee benefits to Medicare and how to avoid penalties. Needs help with meeting deadlines for applying to social security for Medicare and choosing the right plan to meet his needs:
- original medicare Part A and/or Part B and buying a Part D drug plan
- A supplemental Plan and a Part D drug plan
- A Medicare Advantage Plan
Solution:- Because the business owner plans on continuing to work he did not request to receive his social security benefits but signed up for Medicare Part A and B. He would pay his part B premium out of pocket until the time he triggers his social security payments. After much discussion, his preferences were for doctors of his choice nationwide not local provider networks requiring referrals for specialists and control over his drug plans. he opted for a supplement plan with a high deductible for a very low premium and a separate prescription drug plan which he could review during the annual enrollment period.
5. Abandoned by Corporate retiree healthcare…….. now what………?
Objective:- 85 year old lady with pre-existing health conditions worked for a fortune 500 company who decided to terminate their retiree health coverage that she had come to rely on. At her advanced age this caused her a great deal of stress in seeking the right guidance to choose an affordable and suitable replacement plan to meet her needs.
Solution:- As a result of her corporate plan leaving she benefited from guaranteed issue making her pre-existing condition invisible. With careful evaluation of what was available in the market place she reduced her deductible and premium by 50% and all the generic medication when mail ordered (free shipping) did not cost her anything above the minimal monthly premium of the drug plan she selected.
e-mail: julia@smarteradvantage.com