Five Situations for Variable Annuities

According to the Insured Retirement Institute, sales of Variable Annuities grew by 3% from this time last year. VAs aren't for everyone, however in the right circumstances, variable annuities offer solid benefits. There are at least 5 scenarios in which an advisor may consider recommending a variable annuity to clients.

Feel free to add your own to the list! You can contact me for more information on annuties at http://www.helpmy401k.us/

1. Lowering Income Taxes
If you are in the maximum federal and state tax bracket, a VA may help to lower your taxes. Please review your situation with a tax specialist, but a VA can work similarly to an IRA in deferring taxes until money is withdrawn from the acccount.

2. Calming Jittery Investors
This is likely the biggest reason why VA sales are up. If you are nervous about the market but still need your money to grow over time, a VA can act as a "life preserver" for your long term savings.

3. Saving Above Contribution Maximums
If you have maxed out your IRA and 401(k) and still want to save more for retirement, you can put money into a VA. If you are a small business owner, you may also consider a SEP IRA (Simplified Employee Pension). The SEP allows you to save up to 25% of your income and deduct it from your taxes.

4. Guaranteed Income
Annuities have a primary purpose of providing guaranteed income. With people living longer and needing income in retirement, having an annuity can be like setting up a personal pension plan from your savings. Look for plans which offer Lifetime Income.

5. Death Benefit
If you haven't taken income, many annuities will guarantee a death benefit of the amount you invested as a minimum. This is important, and this is where an annuity differs from ordinary mutual funds.

Here's an example. Let's take 2 investors, George and Jerry. Let's say that both of them retire at 65 years old and have 401(k) balances of $100,000. They roll their 401(k) plans over to IRAs. George invests in mutual funds, while Jerry invests in a variable annuity with a guaranteed minimum death benefit. After 4 years, we have another huge loss in the stock market, and their accounts drop to $80,000. Neither of them have taken any income out of their IRAs yet, and are still under the age of 70 1/2 when they would need to take a Required Minimum Distribution.

If George dies, he leaves the balance of his account - $80,000 to his beneficiaries. If Jerry dies, he would leave $100,000, which is what he started with, even if the value of the account is less. Of course, if the account balance in either case is more than $100,000, the death benefit would be the same as the account balance.

Annuities can be beneficial in the right situations. Please contact me and let me know how I may help further.

Ageism

Ever heard of ageism? Ageism is a term coined by Dr. Robert Butler which refers to discrimination against the elderly. How does this affect you?

As a nation, we are getting older. People are living longer than they did in previous generations. According to http://www.socialsecurity.gov/ a male who lives to age 65 can reasonably expect to live until age 82. A female at age 65 can reasonably expect to live until age 85. Earlier this year, Federal Reserve Chairman Ben Bernanke discussed the effects of aging on the U.S. economy. Mr. Bernanke stated that "the U.S. must begin now to prepare for this coming demographic transition."  
Dr. Robert Butler, 83 is in charge of the National Institute on Aging. Dr. Butler, a Pulitzer Prize winner, has also written six books about aging issues and is the the founder of the International Longevity Center. In a recent article in Investment Advisor magazine, Dr. Butler discusses his thoughts on aging. Did you know that in 2025, only 15 years from now, more than 1 in 5 persons will be 65 or older?

Dr. Butler says that older people "should probably plan to work longer than they envisioned." He adds that regarding Social Security and our workforce, "It's very obvious and striking that if people stay in the workforce longer, they put more money into the system and take less money out."

What does this mean for you?

For those in my generation (I am 46 at this time.) we need to think seriously about working longer. Also, we need to prepare for changer in Social Security. We must do a better job of saving and investing in our 401(k) or 403(b) plans. Since we don't have pensions and can't count on Social Security for our future income, the 401(k) has to be our main method for retirement savings.

Saving in a 401(k) means you have to do the work. No one else will care about your future the way you do. My book, Help! My 401(k) Has Fallen - And Must Get Up! has several ideas and strategies which will help you in your journey. Get your 'Fallen' 401(k) back on its feet. Contact me to reserve your copy today, or visit http://www.my401khasfallen.com/.

You can also get a FREE report at my website, http://www.helpmy401k.us/ The 5 Biggest Problems With 401(k) Plans - And How To Fix Them. If you live in the South Bend, IN area, I am also happy to help with 401(k) rollovers or IRA reviews. You can follow me on Twitter, Linked In, or Facebook.

My weekly radio show is Improving Your Financial Health on WHME-FM in South Bend, and archives are available for listening on my website.   

3 Big 401(k) Mistakes

I had a chance to read a great article this week by Joe Mont. Big 401(k) Mistakes That Hurt Savings - June 1, 2010. This article was interesting to me for a few reasons. The facts he outlines tell me that there is definitely a need for my book,
Help! My 401(k) Has Fallen - And Must Get Up!

Mr. Mont agrees with me that "neither the market losses of 2008 nor the robust rally of 2009 have motivated workers to make their 401(k) plans their top priority." This is based on Hewitt Associates annual retirement study.

"While it's encouraging that most workers stayed the course, most did so simply because they were disengaged with the retirement saving process or too paralyzed with fear and confusion to touch their 401(k) plans", says Pamela Hess, Hewitt's director of retirement research. "If employees continue to ignore their 401(k) plans, they're hurting themselves by letting the market dictate their retirement strategy."

Mistake #1 - We Don't Save Enough

We don't save enough in these plans! There STILL needs to be a sense of urgency. Your 401(k) = Your Retirement - PERIOD!

Pensions began to disappear at about the same time leisure suits and Betamax video did - and NONE of these are coming back! When it comes to Social Security, Americans everywhere of all ages are concerned about the Federal Government's ability to continue the program as it currently exists. Also, it was never intended to be anyone's main source of retirement income. However for 1/3 of elderly Americans, it is the source of nearly all their income. This is according to the Center on Budget and Policy Priorities.

Your 401(k) - or 403(b) if you work for a non-profit organization may be ALL YOU HAVE!

Hewitt's study also shows about 28% of participants don't contribute enough to even get the full matching benefit from their employers. That's frightening especially considering that many companies have reduced or eliminated matching contributions over the past year. Penelope Wang reports in her March 2010 article, Make the Best of a Bad 401(k) that "before the financial crisis, only 6% of plans didn't offer workers a matching contribution as an incentive to boost participation. But that number spiked last year, as another 12% of employers reduced or suspended their matches." 

Ms. Wang goes on to add - "If you have a missing or reduced match, there's no getting around the fact that you'll have to make up the difference by saving more."




Pamela Hess of Hewitt says, "It was interesting to watch employee reactions to the match suspension. We had expected some really serious impacts to the savings rates, but it didn't change things as much as we thought."

Mistake # 2 - We Don't Rebalance

Here's a question for you. How often do you visit your dentist? What would happen to your teeth if you didn't brush or visit the dentist regularly?

Just like the dentist, you need to review your 401(k) plan with a professional to make sure you are on track with your retirement goals and that you have the right mix. Balance helps you to lower your overal risk. You get your tires re-balanced to keep your car straight, and rebalancing your account serves the same purpose.

With that in mind, target-date funds have become much more popular. A 'target-date fund' is one made up of a blend of several mutual funds. You can easily spot them in your menu of investment choices because they have a year in the name of the fund. "Fidelity Freedom 2040" would be an example of a target-date fund. The year represents the approximate time in which you would wish to retire. With this type of fund, it gradually become more and more conservative as the year approaches.

Hewitt's study from Mr. Mott's article shows that in 2009, 25% of workers use target-date funds in their  401(k) plans. Mr. Mott explains that some of this is due to employers who automatically enroll their new workers into the company 401(k) plan. 69% of these employers use a target-date fund as the default option.
Greg Johnson, president and CEO of Franklin Resources says that "target-date funds will become a bigger and bigger part of the new money that's flowing into 401(k)s."  

Even if you do use a target-date fund, please review your account with an advisor. Ask them about the mix. Is it too conservative? too aggressive? or just about right? Are you saving enough to reach your goals? What will your income needs be at retirement? How will your 401(k) be able to meet your income needs? All great questions for an advisor. Don't do your own dental work! Get a pro to prevent 'decay' in your 401(k).

Mistake # 3 - We Kill Our 401(k)s From Withdrawals

Hewitt's study shows that in 2009, 7.1% of participants withdrew from reitrement plans. That is more than in any year since 2002. Loans kill 401(k)s also, and loans automatically become withdrawals once employment ends at the company. Hewitt reports that more than 25% of employees had an existing loan on their 401(k) plan at the end of 2009.

This isn't all that surprising to me. I have spoken with several people who have cashed out 401(k)s. The reasons are varied, but they all boil down to "I need the money right now." It is especially common among younger workers who don't see the future and feel the need to use the money for something else. They don't seem to realize or be concerned that this money may be cut almost IN HALF after taxes and penalties are taken out. A $20,000 account could be reduced to about $11,000 or $12,000 easily when it is withdrawn.

Joe Mont's article is right on time. Please AVOID these big mistakes in your 401(k). I have attempted to contact Mr. Mott after reading this piece and offer him a guest spot on Improving Your Financial Health. As of today, I am waiting to hear back from him.

Please contact me at my website, http://www.helpmy401k.us/ for more information and a FREE REPORT, The Five Biggest Problems With 401(k) Plans - And How To Fix Them! I'm also well equipped to help with 401(k) rollovers or plan reviews.


You can follow me on Twitter, Linked In, or Facebook. I also host a radio program, Improving Your Financial Health, on WHME-FM (103.1) in South Bend, IN.

Happy 30th Birthday!

Happy 30th Birthday!


Did you know that the 401(k) plan is 30 this year? In 1980, Ted Benna, a Human Resources representative for Johnson & Johnson was asked to put together a new retirement savings plan for the employees there. The plan he devised was based on a new section of the Federal Tax Code, section 401(k).

Section 401(k) allowed corporate employees to direct a portion of their income into a special savings plan for their retirement. There are very similar sections in the code for employees of non-profit organizations - 403(b), and for governement workers - 457(b). Employees were encouraged to do this to create their own savings AND lower their taxable income. For example, if you had a salary of $40,000/year and you were able to put $4000 into your plan, your taxable income automatically drops to $36,000. Savings plans quickly became known as "401(k) plans" from this part of the tax code.

Mr. Benna realized that pensions could not continue effectively. People were living much longer than they did in the 1930's and 1940's. Because people were living longer on average, it created a serious cash flow problem for companies. They simply could not afford to pay retirees for 20 or 30 years. We are also seeing the same problem with Social Security, which is our national 'pension' plan.

What the 401(k) plan did was to shift the responsibility of retirement savings from the employer to the employee. That changed everything!

Once Mr. Benna's new savings plan was in place at Johnson & Johnson, this idea spread like crazy around the country. Companies saw that they could save millions of dollars by eliminating pensions and having workers fund their own retirement. Companies were able to acheive even greater tax savings by making matching contributions on behalf of their employees.

So what does the 401(k) mean to you?
Why do you need one as a corporate worker?

That's simple. No one else (including your employer) will help you to save for your future! For years, financial advisors have thought of retirement income as a three-legged stool - Pension Income, Social Security Income, and income from personal savings.

Well, these days 2 of the 3 legs are broken! If you have no savings, the whole stool is collapsed. For many people I know, the 401(k) at work may be the only real savings they have. Because "life happens", as I have seen on a bumper sticker, it can be very tempting to stop putting money into your 401(k). You may also be tempted because of the doom & gloom we see on the news. Some people have also taken money out which can significantly affect your taxes.
Even after 30 years, the biggest concern with 401(k) plans is that companies don't really do much to inform their employees on how to properly use their 401(k). It's just not enough to have a guy come out twice a year and hand out packets.

Remember, this is your future savings after all! Ask questions. Work out a plan for how much you should save based on your age, income needs, and willingness to take risk.

You need to build a solid 401(k) to give yourself a chance in retirement. Without it, your future vocabulary may include the sentence "Welcome to Walmart."

Those who are unwilling to take risk should listen to what Gen. Douglas Mac Arthur says on the subject. "There is no security on this earth; there is only opportunity."

There is a difference though between taking educated and uneducated risks.

My book, Help! My 401(k) Has Fallen - And Must Get Up! will help with this. In the book, I will share secrets with you about your 401(k) which will let you get more out of the plan. For about the price of a pizza, you can learn about how to get your 401(k) back on its feet. Please contact me at my website, http://www.helpmy401k.us/ for more information and a FREE REPORT, The Five Biggest Problems With 401(k) Plans - And How To Fix Them!

You can follow me on Twitter, Linked In, or Facebook. I also host a radio program, Improving Your Financial Health, on WHME-FM (103.1) in South Bend, IN.

Diary of a Wimpy 401(k) - Editing (Part 2)

Well, I am finally done with typesetting and editing on the book, "Help! My 401(k) Has Fallen - And Must Get Up!" . The process of editing reminded me of watching a potter making a clay jar. We've all seen the image of a lump of wet clay on a turntable, spinning while the potter's hands mold the clay into a beautiful jar.

I actually finished writing in March, and have had my mother, my sister, an attorney friend, my compliance department, and several financial authors look at my "lump of clay" and give feedback. Then, when all of that was done, I turned it over to Angela Werner of Hohne-Werner Design. She was able to typeset the book and also offered a few tips of her own. Looking at the first draft she sent me almost felt like I was starting all over with a lump of wet clay again!

I pored through my review copy and made many edits, notes, and wording changes. I was pretty surprised at how many changes I wanted to make. My mother & sister did the same, and both of them caught things I had not. The great news is that now I have a finished "jar". Now we just need to take it to the kiln and bake it. Amazon can take my material, combine it with the book cover - and "Voila!" we have a book!

Tell a friend. Use the promo code "401k" when you order the book, "Help! My 401(k) Has Fallen - And Must Get Up!" and get $4.01 off the cover price. By the way, you can get FREE SHIPPING when you order TWO copies. I will also have the e-book version available, which would save you even more. Just download it directly and enjoy the book!

You can contact me for 401(k) questions or rollovers at my website http://www.helpmy401k.us/. You can also contact or follow me on Linked In or Twitter. My radio program, "Improving Your Financial Health" can be heard on Saturday mornings at 9:00 am on WHME-FM in South Bend and recorded archives can be heard on my website.

What Do Mary Kay and Your 401(k) Have In Common?

I finally got some feedback from my compliance supervisor, regarding my upcoming book, "Help! My 401(k) Has Fallen - And Must Get Up!"  
As a licensed Financial Advisor, I certainly want to be sure my book stays "in bounds". I need to "C M A" - so to say.

How do I C M A? (Cover My ***) Two main rules -

             1. No wild promises.
             2. No product endorsements.

Years ago, I remember reading the story of Mary Kay Ash, founder of Mary Kay Cosmetics. Mary Kay said that she lived by a principle which I found fitting. "I never promised a woman that my products would make her beautiful, but I always tried to give her hope." 

I like that. You could certainly apply the same concept to financial services and even more specifically to my book. We have been bombarded by the media with "hopelessness" at every turn. My job is to be a beacon of light. Straight talk and common sense to show the way. With no pensions, a weak Social Security system, and people living much longer, you really need your 401(k) to grow strong.

In the book, there are examples which DO show specific mutual funds. However, I was asked to simply enter a disclaimer footnote. This avoids endorsement of a certain product or fund.

"Investors should carefully consider the investment objectives, risks, charges, and expenses of mutual funds. This and other important information is contained in each fund's summary prospectus and/or prospectus, which can be obtained from a financial professional and should be read carefully before investing. Investments outside the United States involve additional risks - as does investing in smaller companies - such as currency fluctuations, political instability, differing securities regulations, and periods of illiquidity. Equity investments are subject to market fluctuations."    

There. I feel much better now, don't you? I have also taken a lot of time to make sure that "Help! My 401(k) Has Fallen - And Must Get Up!" is properly referenced and indexed. If someone else said it, it must be OK for me to say it - as long as I credit the source.

In the end, I'm happy with the way the book is turning out. My next piece will be on the final editing.
I'm proud to say - I covered my "A".

You can contact me through my website. I am currently accepting new clients and specialize in 401(k) rollovers. You can get a FREE REPORT there also, "The 5 Biggest Problems With 401(k) Plans - And How to Fix Them". Follow me on Twitter or Linked In.

My radio program, "Improving Your Financial Health" is weekly on Saturday mornings at 9:00am EST on Harvest 103.1 WHME-FM in South Bend. Archived programs are also on my website under WHME.
Best wishes to you!   

Get The Word OUT!

I've been getting a lot of questions about the book, "Help! My 401(k) Has Fallen - And Must Get Up!" The book will be available shortly (end of May) for ordering from Amazon. Since this book was written to help EVERYONE with a 401(k) or 403(b), my biggest concern now is -

How do I make sure that EVERYONE knows about it?

Having a radio program is a real bonus. In fact, on May 29, I am doing a special edition of "Improving Your Financial Health". With so many questions about this unique book, I thought the best way to answer them would be on the air. Be sure to listen to the program Sat. May 29 at 9:00 am on Harvest 103.1 WHME-FM. If you don't live in the South Bend area, or aren't able to listen at that time, no worries. You can still catch the archived recording on my website, www.helpmy401k.us . All previously recorded programs are kept there.

My book website, http://www.my401khasfallen.com/ will also include FAQs and resources which were helpful in writing the book. The new video will be there also, and can currently be seen on You Tube. I will write some more about this, and I've gotten a lot of positive feedback so far on the video.

Most people are thrilled that I didn't strip nude, a la Erykah Badu. (You DON'T want to see this body in the buff!) Although I can't say the same for the pig, who is the main character in the video.

Sooooo, if you want to see a naked piggy bank reading a book, you will like this! (Don't worry the nudity is tastefully done in an 'artsy' way.)

Anything that you can do to help get the word out about the book

"Help! My 401(k) Has Fallen - And Must Get Up!" would be greatly appreciated.

For rolling over a 401(k), or the best rates on tax-free bonds, you can contact me through my website http://www.helpmy401k.us/. You can also follow me on Twitter @deanvoelker or Linked In. 

"Improving Your Financial Health" is a weekly financial advice radio program, which also showcases interesting guests. This program airs Saturday mornings at 9:00 am on WHME-FM in South Bend, IN and on my website.