Increase Your Financial Security in 1 Simple Step
Your financial security in retirement is weakened when you rely on the success of the stock market. Is there a different tool that can help you retire in a more secure way?
Check out Mike on Money to find out how you can increase your financial security in 1 simple step
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08:00:00:10 - 09:59:26:01
Mike
Today we are going to talk about a financial tool that generates more questions from the people we serve from our clients, from people we talked to. This financial tool generates more questions and is less understood than probably every other financial tool combined. So let's talk about what is an annuity and when should you be thinking about using this tool and when should you not be thinking about using this tool?
09:59:26:00 - 09:58:55:18
Mike
How about that? How do we demystify this word annuity? Like what does an annuity mean? Like what really is an annuity? The word annuity goes back many, many years, but essentially annuity equals a stream of income. Now, that stream of income could be for a certain period of time, for five years, for ten years, or it could also be for life.
09:58:55:15 - 09:58:20:28
Mike
So this is the traditional definition And if you think about it, this really means a pension. So traditionally, the idea behind a annuity was this and here's how traditional retirement planning went. It all went on this concept of a three legged stool and the way it would work is leg number one would be Social Security. Leg number two would be a pension or an annuity.
09:58:20:11 - 09:57:49:18
Mike
And like number three, savings, you know, like a four or one K, something like that. So when my father retired, he had all of these. He has my mom is Social Security. They have a pension. They had a 41 K. They got it all figured out. But here's what's important about this model. Notice that these two right here, both represent lifetime income.
09:57:49:06 - 09:57:23:05
Mike
The way it worked with my parents is they said, well, gosh, and this was true for a lot of people their pensions who retired right around 1999. 2000 right in there and a lot of people who retired today maybe they work for the state or is teachers they might have something similar. But notice for my parents Social Security pension those two income streams are guaranteed for life.