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Think About Annuities as a Way to
Stabilize Income for Retirement
Bobby M. Collins, Education Annuities Specialist in
Dallas/Fort Worth North Texas
Retirement, particularly in North Texas and the
Dallas/Fort Worth Metroplex, requires careful
consideration. One option are annuities.
What are annuities? Simply put, you agree to pay an
insurance company–either in installments or with one
lump sum–and in return they pay you in the future.
Compared to investing in the stock market, which can
be risky, or CDs, which have very low interest rates,
annuities can be a stable alternative. In fact, annuities
help protect against excessive loss by providing
guaranteed income.
Not everyone might understand how annuities work or
why it’s beneficial to get one. However, there are many
reasons why to include an annuity as part of your
overall retirement-related portfolio.
It’s a great way to balance long-term financial goals with a reasonable risk you're willing to take.
It can also provide a guaranteed income–especially important for retirees in the Dallas/Fort
Worth Metroplex and North Texas areas.
Special Financial Considerations for Dallas/Fort
Worth and North Texas
Before we get further into specific financial details, let’s first address some special needs for
Texans. An important factor for retirement is financial stability (according to WalletHub). A
1
Think About Annuities as a Way to Stabilize Income for Retirement // Bobby M. Collins
—----------------------
third of those surveyed said they feel very confident that they have enough money to stay
financially comfortable in retirement (conducted by the Life Confidence Survey).
So how does Texas rank? Yes, there is warm weather, delicious food and friendly people,
however, cities in North Texas actually rank among the worst places to retire in America,
according to personal finance site WalletHub.
Arlington is10th on the list; Garland is 19th; Fort Worth is 100th; and Dallas is slightly behind at
106.
What does this all mean? Seniors are drawn to the places where their money goes the farthest.
Because The Metroplex and North Texas are not considered ideal, at least according to these
financial metrics, money management is increasingly important for retirees or those nearing
retirement. This makes finding the right financial solution essential.
What Are Annuities and Why Are They Important
So, back to annuities. Annuities are an agreement with an insurance company where you
promise to pay them and in return, they promise to give you a steady income in the future. You
can make a one-time payment or choose to opt-in with regular disbursements.
Who are best served by annuities? Anyone looking for a steady and reliable source of income,
especially during times of economic uncertainty or retirees.
Types of Annuities
The four types of annuities are fixed, variable, indexed single premium immediate annuity or
SPIA.
A fixed annuity pays a guaranteed amount that does not change, offering guaranteed protection
that your initial investment will never decrease. Variable annuities offer higher rates of
return–and thus higher risks–but the amount you receive will change over time. Indexed
annuities have a guaranteed minimum disbursement where a portion of the profits are tied to a
market index like the S&P 500. SPIA, the simplest, is when you make a single large deposit and
your monthly payments begin immediately. Finally, deferred annuities provide flexibility,
allowing you to receive payments at a specific time.
2
Think About Annuities as a Way to Stabilize Income for Retirement // Bobby M. Collins
—----------------------
3 Reasons to Consider Buying an Annuity
One reason to consider buying an annuity is it protects your original investment. A key part in
crafting a financially secure retirement is calculating ways to best safeguard, and of course, build
the investment–after all, you've worked and saved your whole life for it. Always select options
that balance a comfortable level of risk with positive returns.
Besides receiving fixed income for life, annuities can provide long-term healthcare, and security
to loved ones. Here are three reasons to consider buying an annuity. Contact Bobby M. Collins to
learn more.
1. Fixed Income for Life
Although terms vary, many annuities provide a fixed and reliable income for as long as you live.
With some, you can specify how long you want to continue receiving payments. The security of
knowing exactly how much to expect from a source of income can provide peace of mind during
retirement.
If you choose a fixed life annuity, it will pay a fixed income until death, which might be a good
option if you are primarily interested in fully funding your own retirement accounts.
A joint benefit with the last survivor's pension costs more but includes disbursements to the
surviving spouse, which is ideal for couples who need to fully support themselves (see more
below).
2. A Way to Pay for Long-Term Care
Long-term care is expensive, as we all know. In Texas, home care services can cost nearly
$6,000 per month (according to a 2021 study by Senior Living), and rose 10 percent just
between 2016 and 2020. Traditional insurance is an option for healthcare but can run out or
expire before needed. This is where annuities come in: they provide a steady and predictable
income that can be used for needed medical assistance.
A lifetime annuity provides a fixed payment earmarked for healthcare when no other option is
available. Also, a built-in dependent is available for a fixed or indexed annuity. This increases
monthly benefits in the event that long-term care is needed. Additionally, withdrawals from
your annuity are tax-free, which can be an important consideration.
3
Think About Annuities as a Way to Stabilize Income for Retirement // Bobby M. Collins
—----------------------
3. Annuities Provide Income for Loved Ones
Another advantage of annuities is that your family will remain financially secure. An option is to
receive support for beneficiaries after your death, alleviating concerns that you may die during
the contribution or fundraising phase. Without this death benefit, your spouse or surviving
family members may not receive anything. This both protects your initial investment and
ensures beneficiaries will receive a guaranteed payout even during years of underperformance.
Buy Annuities in Your 401(k)
You probably have a 401(k), but did you know that you might be able to purchase annuities right
in your plan? You can invest in a variety of financial products such as managed index funds,
actively managed mutual funds and more. An increasing number of plans allow for the purchase
of annuities, another retirement funding option.
Although they might be less common and appear more complex than conventional financial
products, annuities can actually save more for retirement. (The SAFETY Act legislation in 2019
opened up many 401(k) annuity plans).
Advantages of Converting a 401(k) into an Annuity
Converting a 401K into an annuity has several advantages. A major one is higher payouts. In
addition, annuity costs can be lower because they are negotiated by the employer.
Payments can be higher through the 401(k) because insurers can save money on marketing,
administrative and other costs when they have a large number of user-driven leads. However,
don't automatically assume the payouts are better without considering what outside annuities
can provide.
Types of Authorized Annuities in 401(k)s
From what I understand, companies who administer 401(k)s such as Fidelity Investments, do
indeed offer annuities. However, the choice is severely limited. I believe the only one available is
SPIA (Single Premium Immediate Annuity).
Here’s how they work. When purchased, you agree to lifetime income for a certain period, such
as for ten or fifteen years. Let’s say all retirement funds are added to this product and a monthly
check is received. This continues for ten years. If the annuity holder dies, the money left in the
account will NOT be passed on to my heirs; the annuity company keeps it. The reason why is
4
Think About Annuities as a Way to Stabilize Income for Retirement // Bobby M. Collins
—----------------------
because the policyholder would have used up protection living more than ten years. Or, take the
example of a fifteen year annuity and the holder died in year ten, the heirs would receive the
monthly checks for another five years, and the company keeps the rest.
This will not fit most retiree's needs.
Make sure the insurance company offering the annuity has solid financial strength from rating
agencies like AM Best. Additionally, check how fees and payments compare to an annuity
available outside of your 401(k).
There is also an early deferred annuity funded by the retirement plan investment. This is called a
Qualified Renewal Annuity Contract (QLAC). As of January 1, 2021, a person can use up to
$135,000 from their retirement savings account to purchase QLAC.
Whether or not to purchase an annuity in a 401(k) is a complex decision that can have a major
impact on your retirement. It's very personal and what your coworkers are doing or what your
HR representative thinks is right may not be right for you. Knowing all the facts and comparing
options is important to making the right decision.
About Bobby M. Collins
Bobby M. Collins is an annuity educator
with 30 years of experience. Keen to help
retirees and those transitioning to
retirement, Bobby founded Collins and
Cate Retirement Income Professionals in
2002 to help find the best annuity for the
right person. Often traveling more than
three hundred miles a day to meet directly
with clients, he serves Dallas/Ft. Worth
Metroplex, Denton County, Amarillo,
Abilene and North Texas.
Some comprehensive retirement plans
include three types of annuities such as
fixed immediate and indexed fixed. He
also has experience in Roth IRAs life insurance 401K, as well as defined benefit plans.
Bobby M. Collins is married to his wife Kari, has two children and two grandsons and lives in
Wichita Falls Texas.
5

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Think About Annuities as a Way to Stabilize Income for Retirement [Presentation]

  • 1. Think About Annuities as a Way to Stabilize Income for Retirement Bobby M. Collins, Education Annuities Specialist in Dallas/Fort Worth North Texas Retirement, particularly in North Texas and the Dallas/Fort Worth Metroplex, requires careful consideration. One option are annuities. What are annuities? Simply put, you agree to pay an insurance company–either in installments or with one lump sum–and in return they pay you in the future. Compared to investing in the stock market, which can be risky, or CDs, which have very low interest rates, annuities can be a stable alternative. In fact, annuities help protect against excessive loss by providing guaranteed income. Not everyone might understand how annuities work or why it’s beneficial to get one. However, there are many reasons why to include an annuity as part of your overall retirement-related portfolio. It’s a great way to balance long-term financial goals with a reasonable risk you're willing to take. It can also provide a guaranteed income–especially important for retirees in the Dallas/Fort Worth Metroplex and North Texas areas. Special Financial Considerations for Dallas/Fort Worth and North Texas Before we get further into specific financial details, let’s first address some special needs for Texans. An important factor for retirement is financial stability (according to WalletHub). A 1
  • 2. Think About Annuities as a Way to Stabilize Income for Retirement // Bobby M. Collins —---------------------- third of those surveyed said they feel very confident that they have enough money to stay financially comfortable in retirement (conducted by the Life Confidence Survey). So how does Texas rank? Yes, there is warm weather, delicious food and friendly people, however, cities in North Texas actually rank among the worst places to retire in America, according to personal finance site WalletHub. Arlington is10th on the list; Garland is 19th; Fort Worth is 100th; and Dallas is slightly behind at 106. What does this all mean? Seniors are drawn to the places where their money goes the farthest. Because The Metroplex and North Texas are not considered ideal, at least according to these financial metrics, money management is increasingly important for retirees or those nearing retirement. This makes finding the right financial solution essential. What Are Annuities and Why Are They Important So, back to annuities. Annuities are an agreement with an insurance company where you promise to pay them and in return, they promise to give you a steady income in the future. You can make a one-time payment or choose to opt-in with regular disbursements. Who are best served by annuities? Anyone looking for a steady and reliable source of income, especially during times of economic uncertainty or retirees. Types of Annuities The four types of annuities are fixed, variable, indexed single premium immediate annuity or SPIA. A fixed annuity pays a guaranteed amount that does not change, offering guaranteed protection that your initial investment will never decrease. Variable annuities offer higher rates of return–and thus higher risks–but the amount you receive will change over time. Indexed annuities have a guaranteed minimum disbursement where a portion of the profits are tied to a market index like the S&P 500. SPIA, the simplest, is when you make a single large deposit and your monthly payments begin immediately. Finally, deferred annuities provide flexibility, allowing you to receive payments at a specific time. 2
  • 3. Think About Annuities as a Way to Stabilize Income for Retirement // Bobby M. Collins —---------------------- 3 Reasons to Consider Buying an Annuity One reason to consider buying an annuity is it protects your original investment. A key part in crafting a financially secure retirement is calculating ways to best safeguard, and of course, build the investment–after all, you've worked and saved your whole life for it. Always select options that balance a comfortable level of risk with positive returns. Besides receiving fixed income for life, annuities can provide long-term healthcare, and security to loved ones. Here are three reasons to consider buying an annuity. Contact Bobby M. Collins to learn more. 1. Fixed Income for Life Although terms vary, many annuities provide a fixed and reliable income for as long as you live. With some, you can specify how long you want to continue receiving payments. The security of knowing exactly how much to expect from a source of income can provide peace of mind during retirement. If you choose a fixed life annuity, it will pay a fixed income until death, which might be a good option if you are primarily interested in fully funding your own retirement accounts. A joint benefit with the last survivor's pension costs more but includes disbursements to the surviving spouse, which is ideal for couples who need to fully support themselves (see more below). 2. A Way to Pay for Long-Term Care Long-term care is expensive, as we all know. In Texas, home care services can cost nearly $6,000 per month (according to a 2021 study by Senior Living), and rose 10 percent just between 2016 and 2020. Traditional insurance is an option for healthcare but can run out or expire before needed. This is where annuities come in: they provide a steady and predictable income that can be used for needed medical assistance. A lifetime annuity provides a fixed payment earmarked for healthcare when no other option is available. Also, a built-in dependent is available for a fixed or indexed annuity. This increases monthly benefits in the event that long-term care is needed. Additionally, withdrawals from your annuity are tax-free, which can be an important consideration. 3
  • 4. Think About Annuities as a Way to Stabilize Income for Retirement // Bobby M. Collins —---------------------- 3. Annuities Provide Income for Loved Ones Another advantage of annuities is that your family will remain financially secure. An option is to receive support for beneficiaries after your death, alleviating concerns that you may die during the contribution or fundraising phase. Without this death benefit, your spouse or surviving family members may not receive anything. This both protects your initial investment and ensures beneficiaries will receive a guaranteed payout even during years of underperformance. Buy Annuities in Your 401(k) You probably have a 401(k), but did you know that you might be able to purchase annuities right in your plan? You can invest in a variety of financial products such as managed index funds, actively managed mutual funds and more. An increasing number of plans allow for the purchase of annuities, another retirement funding option. Although they might be less common and appear more complex than conventional financial products, annuities can actually save more for retirement. (The SAFETY Act legislation in 2019 opened up many 401(k) annuity plans). Advantages of Converting a 401(k) into an Annuity Converting a 401K into an annuity has several advantages. A major one is higher payouts. In addition, annuity costs can be lower because they are negotiated by the employer. Payments can be higher through the 401(k) because insurers can save money on marketing, administrative and other costs when they have a large number of user-driven leads. However, don't automatically assume the payouts are better without considering what outside annuities can provide. Types of Authorized Annuities in 401(k)s From what I understand, companies who administer 401(k)s such as Fidelity Investments, do indeed offer annuities. However, the choice is severely limited. I believe the only one available is SPIA (Single Premium Immediate Annuity). Here’s how they work. When purchased, you agree to lifetime income for a certain period, such as for ten or fifteen years. Let’s say all retirement funds are added to this product and a monthly check is received. This continues for ten years. If the annuity holder dies, the money left in the account will NOT be passed on to my heirs; the annuity company keeps it. The reason why is 4
  • 5. Think About Annuities as a Way to Stabilize Income for Retirement // Bobby M. Collins —---------------------- because the policyholder would have used up protection living more than ten years. Or, take the example of a fifteen year annuity and the holder died in year ten, the heirs would receive the monthly checks for another five years, and the company keeps the rest. This will not fit most retiree's needs. Make sure the insurance company offering the annuity has solid financial strength from rating agencies like AM Best. Additionally, check how fees and payments compare to an annuity available outside of your 401(k). There is also an early deferred annuity funded by the retirement plan investment. This is called a Qualified Renewal Annuity Contract (QLAC). As of January 1, 2021, a person can use up to $135,000 from their retirement savings account to purchase QLAC. Whether or not to purchase an annuity in a 401(k) is a complex decision that can have a major impact on your retirement. It's very personal and what your coworkers are doing or what your HR representative thinks is right may not be right for you. Knowing all the facts and comparing options is important to making the right decision. About Bobby M. Collins Bobby M. Collins is an annuity educator with 30 years of experience. Keen to help retirees and those transitioning to retirement, Bobby founded Collins and Cate Retirement Income Professionals in 2002 to help find the best annuity for the right person. Often traveling more than three hundred miles a day to meet directly with clients, he serves Dallas/Ft. Worth Metroplex, Denton County, Amarillo, Abilene and North Texas. Some comprehensive retirement plans include three types of annuities such as fixed immediate and indexed fixed. He also has experience in Roth IRAs life insurance 401K, as well as defined benefit plans. Bobby M. Collins is married to his wife Kari, has two children and two grandsons and lives in Wichita Falls Texas. 5