Major Financial Move Negatively Affected Retirement Plan
Oftentimes, new clients come to us after realizing they or a previous financial advisor missed a crucial action step that would have significantly impacted their tax situation. One such example involved an advisor who did not ask the client about their goals and moved forward with a major financial decision that had significant impact on their retirement plan.
What is a fixed annuity?
A fixed annuity offers a principal-protected source of investment returns for your retirement assets. In a fixed annuity contract, you make an investment to an annuity company, and in exchange, the company pays you a fixed return on contributions, no matter how the markets perform. (Click here to learn more about fixed annuities.)
Client’s Retirement was Delayed After Being Locked into a Fixed Annuity…
In 2020 during the COVID outbreak, many investors worried about the state of their retirement funds and reacted in fear. One client who wanted to retire in the next five years was no different.
Because most of their funds were in a 401(k) and they wanted to preserve these, the client sought an advisor who would pull them out of the market and put their money in a principal-protected account. The original goal of this was to safeguard their wealth amid market volatility while still achieving growth.
The trouble began when the advisor put the client in a 10-year fixed annuity that went past their intended retirement date, clearly missing their time horizon. Because of this, the annuity is not “out of surrender” (available for withdrawal without penalties) until 2030. Thus, most of their money was locked up in this account for a much longer time than was needed. On top of that, the client’s advisor later retired, and the funds were moved to a new advisor who was taking a fee from them without having reached out to review their plan.
This is just one telling example of why it is so crucial to have an advisor who will take the time to sit down with you and map out your retirement plan. Although you may have an advisor who meets your most immediate goal, if they do not take the time to thoroughly review all of your goals and instead choose to sell you the next product, your plan as a whole may be overlooked.
When you sit down with a Storen Financial advisor, we discuss more than one option and take the time to explain the benefits and pitfalls of each. Our advisors will assess the lifestyle you want in retirement so that we can place funds accordingly, designate beneficiaries, determine wealth transfer strategies, discuss options such as long-term health care and social security planning, and more. We will also discuss how your retirement goals and the financial decisions you make affect your tax liability, with the ultimate objective that you know where your money is going and how to save as much of it as possible. (Click here to learn more about our Storen Financial Investment Advisory Program.)
Have questions? Or interested in meeting with our Storen Advisory team? Click here to contact us now. Or click here to learn more about our Financial Planning Investment Services.
Blog by Kiran Sharma – Financial Advisor
Learn more about Kiran and the rest of the Storen Financial team here.
This is a hypothetical situation based on real life examples. Names and circumstances have been changed. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments or strategies may be appropriate for you, consult your advisor prior to investing. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
Any references to protection benefits or lifetime income generally refer to fixed insurance products, never securities or investment products.
Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company.
Fixed annuities are suitable for long-term investing, such as retirement investing. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply.