If you are like most people in the ?over 50? or Baby Boomer crowd, you are rightfully concerned about having saved enough to provide enough income in your retirement years. That income will be needed to allow you and your spouse to relax and enjoy your well earned retirement years. Like me, you have probably dreamed of the time when you would have more control over your lifestyle and not have to put up with jobs or people you do not care for just to make ends meet.
No, we want better than that! I decided long ago that, sooner or later, I would enjoy being the master of my own life and not having to do the things that I have had to do my entire career. I will probably never quit ?working? entirely; I wanted to just quit ?having to work?. I will do this on my terms!
But, I have been worried! Worried about my lack of a traditional pension, the eventual insolvency of the Social Security system, the housing market, oil dependency, the falling dollar, etc, These worries combine to have me concerned whether or not I have saved enough over the years.
Maybe you have heard the analogy that defines the word ?commitment? It say that this morning I had eggs and ham for breakfast. The egg that produced my eggs was ?involved in my breakfast, but the pig was ?committed to it!
Well, since I have already ?pulled the plug? and begun to draw my Social Security at age 63, I am now ?committed?. These concerns and worries had me considering going back to work at a traditional job, but I really like the freedom of a retirement lifestyle.
Shortly after I retired last year and the immediate excitement of retirement passed, I began to feel depressed. You see, most of my daily human interaction, other than my wife, used to come from my job, and now that was gone. My feelings of self worth seemed to be diminishing. I knew that I really had to find something to do.
I began about to explore the possibilities of earning some income through various internet activities. My objective was not to ?Get Rich? (although that would be nice!), but to dramatically reduce the amount of cash that I need to take from my investments to live on. If I can just leave my savings grow, essentially untouched, for a few years, then my confidence in the future will be greatly improved.
On the Internet, I have done several things to earn some income. I have written a book (an e book) that I sell on the internet. I have setup websites on many topics of my interest, such as power boating. Those sites host some Google ads which pay me a real small fee every time someone clicks on them. I have bought and sold items on eBay and produced videos and CD's for sale. There are just so very many ways to earn some extra cash.
The wonderful thing about this is that these things earn money in my absence, even when I'm playing golf or sleeping, so my time is still my own. I am not tied down and we are free to travel at will ? and the cash just seems to keep coming in!
These Internet-oriented projects have not produced much more than $2,000 a month so far, but I am not disappointed. I am continuously challenged to always improve on this, and I am confident that, with some effort on my part, I will. While everybody seems to want more money, I am now worried that if I am too successful, these projects will consume too much of my time to enjoy life! That would be a tragedy.
Many of my retiree friends (as well as retiree ?wannabees?) want to know how I am doing this. For that reason, I have created a website for people to come and to learn some of the techniques and skills that it takes to accomplish this cash flow goal. Some of my ?pupils? have far surpassed my income level so far. Due to budgetary constraints, I have refrained from buying many of the ?Get Rich Quick? offers that seem to flood the Internet. I think that is a good thing. One of the valuable things that we do is host a ?Retirement Income Forum? where like minded people discuss their project, successes and impediments and get the real advice and input of others in the same boat.
There are many, many ways to earn extra retirement income on the internet and there is plenty for everybody! The World Wide Web is growing every day and maturing rapidly. I would recommend to anyone that could use some extra retirement income to get online right now and get your share!
Joe Smith writes- I just retired. I have worked all my life and am ready to have some fun in retirement. I want to figure out how much income I can take in retirement without running out. I have $200,000 in my 401k plan with my former employer. I am 65 years old and my wife Emma is 56 years old and would like to be guaranteed to at least have income for the next 20 years for me or for my wife if I don't make it that long. What are my options when it comes to annuities?
We have two solutions you may want to consider. As with all investment planning there are advantages and disadvantages to each option and my job is to help you understand them.
Option #1 Income for life There are different types of annuities available that can help make sure you have income for the rest of your life and the rest of your beneficiary's life. One solution is called a "lifetime five" option. This is where you invest in an annuity that is invested in a managed portfolio of stocks and bonds. The investment decision-making is left up to the annuity company.
You are initially guaranteed each year to receive 5% of the original amount invested for your life and your wife's life. Since you are both over the age of 55 you would qualify for this type of annuity. Age 55 is the minimum age. You are guaranteed by the annuity company that you will be able to take an income payment of at least: $200,000 x 5% = $10,000 per year for the rest of your life and the rest of your wife's life
This is the minimum guarantee provided by the insurance company. This annuity also has the ability to raise the minimum amount you can be paid every 3 years. For example: If you invest $200,000 and in three years your portfolio has grown to $215,000 your new minimum guarantee is: $215,000 x 5% = $10,750. You just got a $750 dollar raise per year for the rest of your lives.
On the other hand, your portfolio may fall to $190,000 after three years. In this scenario you would not have any stepped up minimum guarantee so you would just collect your original $200,000 x 5% = $10,000 per year for the rest of your lives. You would get another chance to increase your income stream in three years.
Remember, you get a chance to step up this account value every three years, but the amount of your annual payout can only go up, it can never go down.
You may ask, "What if I need some money for an emergency in a lump sum?" In this situation you would be able to withdraw your portfolio's value, less any withdrawals and penalties. It most likely will have some value but due to market fluctuations and withdrawals it may be lower than your original investment. You may also have to pay a surrender fee of up to 10%.
In summary: Advantages: Known income stream for life, with upside potential. (In this example a minimum of $10,000 for life.) You have upside potential but no downside risk in income streams You can participate in market gains every three years and possibly adjust your income upward. If, after the surrender period is up, (usually 7 to 10 years) and your account value has gone up, you can walk away from the contract if you want and invest in another annuity. This may be to your advantage if you don't want to wait another 3 years to up your income stream. Guaranteed an income stream for over 20 years, if you live longer than 20 years and for your wife's life even if she lives any number of years after you die.
Disadvantages: If you need to withdraw the entire amount of your money within the first 7 to 10 years of investing your money, you will pay a surrender fee of up to 10%. If you want to walk away from the annuity contract because you need the money in a lump sum your account value can possibly be down from your original investment. The insurance company allowing this "income for life guaranteed benefit" no matter what happens to the account value does not come for free. There are additional annual fees involved in order to provide these guarantees. You should expect somewhere between 0.50% and 0.75% of the account value. Option #2 Income for your life or 20 years whichever is longer. (Immediate Annuity)
In this type of annuity we are talking about an immediate annuity. This is where you buy an annuity contract and immediately annuitize the contract. In this situation things are a little simpler, but as we may demonstrate you may pay a price for the simplicity.
In this type of contract the main advantage is the annual payout for this contract is higher than in the previous example. For an individual who has $200,000 to invest the immediate annuity quotes we get from annuity companies average out to $13,500.
Let's look at how this works. In this example, the annuity company will pay $13,500 every year for the rest of your life, or 20 years, whichever lasts longer. So if you live for 25 years, to age 90, the annuity company will pay him $13,500 every year for 25 years. If you lives only another 11 years and dies, his beneficiary (in this case probably his wife Emma) will receive the remaining 9 years of income payments of $13,500 and that is it. At the end of your life the annuity company knows that if they have not already paid out 20 years of payments one of the beneficiaries will get the remaining payments.
Let's say you die in 21 years after he initiated this contract. The annuity company has fulfilled their promise of a minimum of 20 years so there will not be anymore payments to anyone. There will be no more money left in the contract and your wife will get nothing.
You might ask, "What if I need to take the money out after 10 years has gone by to pay a medical bill?" The answer is that you cannot do so. When you get into an immediate annuity contract there is virtually no way to get out of it. You will not have any cash value after you sign the paperwork. All the annuity company is obligated to do is pay out 20 years, or the length of your life whichever is longer. After the annuity's obligation is up the contract is worth nothing.
In summary:
Advantages: Known income stream for life of the owner. Higher starting income stream that never changes No concerns of the underlying investments because the annuity company is responsible for that. Guaranteed an income stream for 20 years, if the owner lives longer than 20 years the annuity company will pay the same amount until the owner passes away.
Disadvantages: If you need your money back at anytime after investing your money, you cannot get it back in lump sum form. You can only collect the annuity payments. If you live for 20 years or longer your beneficiary will not see any money from this annuity. There is no ability to increase your income stream. Your payments will stay the same and will not have a chance to increase with inflation.
These are two of many options available to one person's situation. Both of these annuities have benefits and drawbacks. It may make sense to discuss further details with our local Denver, Colorado annuity consultant.
Both Don Seibert & Searchforadvisor.com are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Don Seibert has sinced written about articles on various topics from Yatch Insurance, Finances and Mortgage Insurance. Don Seibert is a retired business executive who writes books and articles on Retirement and how to carve out a great retirement lifestyle. Don hosts a popular retirement income website at. Don Seibert's top article generates over 5400 views. to your Favourites.
Searchforadvisor.com has sinced written about articles on various topics from Finances, Life Insurance. Searchforadvisor.com is based in Denver, Colorado.. Searchforadvisor.com's top article generates over 14800 views. to your Favourites.